Question

Explain the effects of inflation on the following:

Fixed income groups

Answer 1

Fixed income earners (i.e., wage and salary earners, pensioners, etc.) suffer during inflation. It is because their incomes do not increase in the same proportion in which prices or the cost of living rise. As a result, these fixed-income earners tend to buy less amount of goods and services than before, even when there is little rise in their income.