Question

Explain how inflation can redistribute income. Why does an unexpected rise in the inflation rate make workers and lenders worse off? Who is made better off? Why does correctly anticipated inflation does not have these distributional effects

Answer 1

ANSWER:-

Inflation can redistribute income. an unexpected rise in the inflation rate make workers and lenders worse off and made better off? does correctly anticipated inflation does not have these distributional effects.

☆ Economic Perspective:

• In the event that it is unforeseen inflation, at that point it helps in redistributing pay, by fundamentally redistributing among leasers and indebted individuals and furthermore when a few wages increment more than the cost level though some expansion gradually. The explanation expansion aggravates fixed-salary laborers off as costs of merchandise and enterprises are rising however the pay isn't subsequently lessening the buying powers.
• For the moneylenders as they get less because of the swelling that is the cash esteem is decreased. Expansion benefits predominately the borrowers as, on the off chance that the wages increment now the cash they reimburse is worth-less, at that point when they had acquired. For a bigger scope, the government benefits the most as its an enormous indebted person and misfortune is borne by the economy.
• Foreseen inflation is uncommon and won't have the appropriation impacts as above as specific strides by the government families will be taken to protect them from the rising costs, for example, money related and monetary approach may be changed to shield the economy from the rising costs.