Yesterday we discussed the problem of rising prices, or, in the economist's terms, inflation. We noted that, during periods of inflation, all prices and incomes do not rise at the same rate. Some incomes rise more slowly than the cost of living, and a few do not rise at all. Other incomes rise more rapidly than the cost of living.
We concluded that persons with fixed incomes, for example, the elderly who deperd upon pensions, and persons with slow-rising incomes as, for ex- ample, an employee with a salary agreed to in a long-term contract, will be most seriously affected by inflation. Please remember that while their dollar incomes, stay the same, the cost of goods and services rises, and in effect, real,income decreases , that is, they are able to purchase less with the same amount of money.
We also talked about the fact that stockholders and persons with business interests and investments would probably benefit most from inflation, since high prices would increase sales receipts, and profits would likely rise faster than the cost of living.
And now, before we begin today's lecture, age there any questions about the term, inflation or any of the examples given in our discussion so far?