Question

Workers and employers in economy expected 3% inflation rate for 2015 but actual inflation turns out to be 5%. Kylie, a casual worker with no labour contract, has remained unaffected while Susie, a fixed term employee, has become worse-off.

To explain if it is true, false, or uncertain.

Answer 1

It is true because

Thecasual worker with no labour contract has remained unaffected because the labour had no contract due to which his income is not fixed and when inflation happens the employee get wages according to change in inflation and their purchasing power parity remains same as he can buy a good and service from his increased wage due to which he remained unaffected .

The fixed term employee become worse off because they get the fixed wage as inflation rate increases or decrease but in this case inflation rate increase due to which the employee have to pay more for the same goods and services due to which they suffer huge loss and sometimes if inflation increases the employee might loose their job it became worseoff for employee as inflation erode purchasing power, increase rate of borrowings, increase unemployment etc.