In: Economics
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.
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