Question

In: Economics

1) Does a casual worker with no labor contract get affected by an inflation rate that...

1) Does a casual worker with no labor contract get affected by an inflation rate that is initially expected to be 3% and actual inflation rate turns out to be 5%?

2) As a parent of two, by reducing working hours to spend more time with the children, is it true that this has necessarily resulted in a lower quality of life due to a fall in income (and resultant fall in economic activity as measured by GDP) while assuming everything else being the same. Explain why.

Solutions

Expert Solution

The casual workers received wages as a return for their work.Both nominal wages and real need to be taken in to consideration.According to Philip's curve there is an inverse relation between the inflation and unemployment .To reduce the unemployment the employees may provide more wages to the labourers.The casual workers expects the inflation to be 3% and when they receive a hike in their wages they think that their real wages has also increased by in reality the actual inflation rate has turned out to be 5%.Thus only nominal wages of the casual workers has increased.The real wages of the casual workers remain the same.
2.It is true that the parents income will reduce and it will lead to lower standard of living when the workers spend less hours of working and more time with their children.As in the question the resultant activity of the worker has also decreased. If the parent is provided wages according to the numbers of work he did there will definitely decline in the level of income the parent receives as he is doing only less hours of work


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