b. Inflation and real income:
Between the real income and nominal income of the employee has a relationship with each other over the rate of inflation. When inflation increases the nominal income does not change, then make the real income of workers fell.
Inflation not only reduces the real value of those assets without interest but also undermine prices asset value of the profits, ie reduces the real income from profits, the profits. It is due to the tax policy of the state is calculated on the basis of nominal income. As inflation increases, the borrower increased the nominal interest rate to compensate for the higher inflation rate, although the rate has not increased.
Since then, net income (net) of the lender's income by Name ie minus the inflation rate will be reduced greatly influence the socio-economic background. As the economic recession, rising unemployment, workers' life becomes harder will reduce the confidence of the people towards the government ...
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