Secondly, purchasing power od households on fixed income decline, as inflation tends to result in more unequal distribution of income as those on lower incomes find their wages do not rise as quickly as those on higher incomes. In times of high inflation household tend to purchase real assets that retain their real value since their prices rise faster than the inflation rate. Finally, another negative impact is the income tax earners suffer from fiscal drag pay rises to combat inflation put them into higher marginal tax brackets. This means as employees’ nominal wages increase with inflation their real wage (purchasing power of nominal wages) may remain constant. Since inflation reduces the incentive for households to save, it causes a shortage of savings for firms to borrow.
Long term economic developments may be identified with expansion, as inflations may increase. Inflations usually increase the cost of products on sale, and as the costs are higher, it will be an issue to the nationality in question to be able to buy their needs There is a limited amount of time involved in the growth of an economy as it involves an increase in GDP. The hypothesis and practice are both diverse. The hypothesis is the thing that economists are able to figure out for themselves; however, to be able to use the hypothesis in reality is the main task. Utilization of the hypothesis is something that really happens at some point.
The Yinfl line on the graph represents the point that is greater than potential output. The increase in aggregate demand is caused by an increase in demand by consumers, firms, government, and foreign countries - leading to inflation. Inflation has consequences such as redistribution effects, uncertainty about the future economy by consumers and firms, menu cost, and may lead to export competitiveness, as well as, lead to inappropriate spending decisions known as money illusion. The last and most costly consequence of inflation is the significant impact that will occur with hyperinflation.
“As inflation rises, every dollar you own buys a smaller percentage of a good or service. When prices rise, and alternatively when the value of money falls you have inflation” (Hayes). For this reason a minimum wage increase would never work. If employers are paying employees more then they will raise costs to offset the added expenses. This will cause the buying power of the dollar to decrease, making it so people who received the minimum wage increases will not be making any more money than they otherwise would’ve, and people who did not have their pay increased, will be making even less money then they had used too.
Just like any other organization, chick-fil-A is greatly affected by the external environment of the business. Often, the external environment is made up of all outside factors and influences that affect the way an organization conducts its daily operation. It is worth noting that an organization has no influence over its external factors and thus, it has to re-engineer and redefine its process, products and services to work under the influence of the external environment. Below are some of the external factors that affect Chick-fil-A. Consumer income Consumer income is in the wider field of economic factors that affect the sales level of the enterprise. Consumers with high income are likely to possess the power and the ability to purchase products from the company in large quantities.
It is determined by supply side factors. Cost-push inflation can be caused by higher price of commodities, imported inflation, higher wages, higher taxes and higher food prices (Economics Help, 2011). Demand-pull inflation happens when there is an increase in the price of goods and services when demand increases too much that it outpaces supply (US Economy, 2015). Sometimes people refer it as “too much money chasing too few goods”. When too much people are
The United States exhibits a wide difference of wealth distribution between rich and poor people, which is larger than any other major developed country.
This curve became widely used by policymakers to control unemployment and inflation by manipulating the opposite variable. Acknowledging the inverse relationship between inflation and unemployment shown in the Phillips Curve, Phelps agreed that inflation depends on unemployment and vice-versa, but he challenged the curve's theoretical foundation and argued that the government should not use the curve as a basis for policy. He noted that when the government attempts to lower unemployment below its natural rate through expansionary monetary or fiscal policy, demand increases and firms respond by raising prices faster than anticipated by workers. With higher prices, firms receive a higher revenue and are able to hire more workers. When workers see that their wages have risen, they supply more labor, leading to a lower unemployment rate.
Another cause of poverty is high inflation. High inflation is the rapid increase of prices in the country; whether it is the increase of the price of gas, food, electricity, water and other things. Not everyone can pay the bill every time it increases because some people have an exact salary to pay all their bills and if the bills increase, they would come up short on money. So where are they going to get the money to pay the bills? They will experience difficulties in paying the bills and finding another source of income to be able to pay.
A more detrimental impact on the current minimum wage in our economy is the inflation rates and the fact that inflation tends to reduce the populations purchasing power of money. According to input by McConnell, Brue, and Flynn, inflation is caused by an excess of total spending that exceeds a firm’s production volume (McConnell Pg 206). In other words, by raising the minimum wage and creating human stimulus, businesses can reach full employment and maximum output. Minimum wage affects inflation because inflation imposes a domino effect in overall economic health and success. Increased costs reduce supply resulting in less total output and employment cuts.
If the minimum wage increases, it doesn’t necessarily mean that the economy will get better or our standards of living will be better. If wages go up, then the standard of living will also increase. There are statistics that have proven why the raise of the minimum wage will actually cause more issues. As the minimum wage increases, the unemployment rate will increase. As well, there is a huge potential of causing small business to collapse due to higher wages and being unable to afford it.