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    Effects of Unanticipated Inflation

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    Evaluate as accurately as you can how each of the following individuals would be affected by unanticipated inflation of 10 percent per year:
    a. A pensioned railroad worker
    b. A department store clerk
    c. A unionized automobile assembly line worker
    d. A heavily indebted farmer
    e. A retired business executive whose current income comes entirely from interest on government bonds
    f. The owner of an independent small town department store

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    Solution Preview

    a- The railroad worker's income from the railroad will decrease 10% from where it was. This won't change unless the worker has another form of income coming in, besides his/her work on the railroad. She/he will see a decrease in income due to the 10% per yr. inflation increase.

    b- A dept. store clerk's income will also decrease by approximately 10% and would be in the same situation as the railroad worker. The increase in inflation will cause a decrease in total income unless the clerk has another source of income.

    c- A unionized ...

    Solution Summary

    This solution explains in detail how each of the individuals listed would be affected by unanticipated inflation of 10 percent per year.