The question is to be answered in a short essay. The recommenced length is 200-5

Question

The question is to be answered in a short essay. The recommenced length is 200-500 words. You have unlimited time, be sure to use resources like your textbook if needed. Each student will be assigned a different question, once you start the activity. Make sure to talk about how your individual is affected by the following?

1. Inflation

2. Deflation

3. Unexpected Inflation

4. How is Inflation different than unexpected inflation?

Theresa

Auto worker / Union member

My name is Theresa. I’m an auto worker at the car factory. My company is high tech and has automated our production line. I have an important job because the buttons I push determine how your car interior is made. Yep, one button selects the type of seats, another button determines the color of the seat fabric and the last button plops the seat on the car frame. It’s a boring job but important because it must be done carefully. If I make a mistake, it’s very expensive for the company to correct it after the car has left the factory. I’m proud to be part of the auto-workers’ union because it really cares about its members.The union just negotiated a new five-year labor contract with a hefty raise plus an annual cost-of –living adjustment – what they call a COLA, and no, it’s not a type of soft drink. Let me tell you why I am so excited about our new contract: My wages are guaranteed to keep up with the inflation rate, no matter what it is, and I get an annual raise on top of it. I’m a great supporter of my union!

Question 1:

Write a 200 – 300 word paper on how the individual in your scenario will be affected by inflation. Consider the effects of inflation, deflation, and unexpected inflation. Make sure to use the individuals name at least once.

Explanation / Answer

The union has recently opted for passing the a new wage agreement where wages are guaranteed to keep up with the inflation rate in the economy. If thia greement is passed then Theresa will not be impacted by inflation rate much. This is because wages will rise as inflation rate in the economy increases and thus real wages will remain constant. This will not have an impact on the standard of living of Theresa as real wages will be constant as per the new wage agreement. However, deflation in the economy will lead to decline in the wages of Theresa as wages are aligned price level in the economy. But real wages will remain constant and thus standard of living will not be impacted.

Considering the impact of unexpected inflation, it can be stated that wage agreement cannot predict unexpected inflation rate in the economy and any unexpected inflation rate in the economy will not change wages of Theresa and thus real wages in case of unexpected inflation rate will decline and this will lower the standard of living as wages will not increase as the same pace because of unexpted inflation rate in the economy.

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