A major cause of economic inequality is the determination of wages in the labor market. There are a lot of factors that influence an income. The income of a person depends on the supply and demand for that person’s labor. This eventually depends on human capital, discrimination, and so on. Wages determine how the total income of an economy is divided among people.
Some of the major effects of inflation are as follows: 1. Effects on Redistribution of Income and Wealth 2. Effects on Production 3. Other Effects Inflation affects different people differently. This is because of the fall in the value of money.
The wage spiral occurs as we are getting closer to the maximum employment so people tend to want a higher wage as the competition has reduced. Of course, we can also see that this causes inflationary pressures from GPL1 to GPL2 but this is not necessarily a bad thing as it can be controlled but also because of the higher wages people can afford it. So a higher GDP seems to lead to a higher standard of living. However, we have missed off a vital part of this analysis of a benefit – who it affects. We have
The price will raise when a government prints too much money, because the money loses some its value. To make up this loss of money the government or even businesses will raise prices. This is called inflation in the economic world. 10. How does the economy affect your personal
High interest rates invite inflation by encouraging consumers to consume more and save less. This will increase the demand for goods produced and hence firms and manufacturers will produce in excess to capitalize on the high demand. High production will lead to goods produced in excess not getting bought and hence destabilizing the market since the business people will want to cut losses and will lower prices drastically hence inflation and making it a necessary evil to engage the production units of a country. Inflation has many different effects that make it to be dubbed a necessary evil. One of these effects is the continued surge in prices while salaries and wages of middle income earners continue to be the same.
Economic research has traditionally focused on some measure of income or wages. Studies assessing the association between parent and offspring income focus on pairs of fathers and sons. Ideally, income should be measured by a household’s disposable income, as this most directly influences the standard of living of individuals. One factor that can be accounted for such low social mobility in United States as compared to other developed countries in the West can be as a result of high income inequality. The more there is inequality there will be less chance for the individuals for upward mobility because social mobility is inversely related to income
Disadvantages: • Export subsidies can cause inflation: since subsidies provided by government are based on costs, an increase in subsidy is directly spent on wage ample hikes demanded by workers. This results in wages in subsidised industries being higher than elsewhere, which makes other workers demand greater wages which are then reflected in prices, causing inflation everywhere in the economy.
This means that some individuals will be given more benefits than others in economic resources which may end up in a total decline in economic growth. The decline is also instigated by mismanagement of affairs in politics, for example Zimbabwe started off as a thriving economy but through the mishandling of political affairs and misunderstanding of the economic policies that governed the country, the political decisions taken caused an economic decline. The influence of politics on economics is demonstrated by examples of inflation. If a country is under inflation, the economy is forced to cut down on the budget deficit. Economic development affects the evolution of institutions and political change.
Moreover, this system also can ensure safety in each country and reduce race and gender inequality. People will be given a reasonable wages no matter who you are. However, the disadvantages of increasing the minimum wage are increasing the cost of production and raising the unemployment rate. After increasing the wages of employees, the employers will charge a higher price of the goods and services which are provided by them to ensure their corporate profit. This is a circulation between wages and the profits.
Government spending will also affect positively on supply-side policies which refers to quantity and quality of Factors of Production. By government spending, there will be higher number of educated people and workers which means higher quality and if workers are better trained higher quantity also. Decrease in taxes will also attract many foreign investors due to lower costs of production, which was one of the governments