Inflation is a central concept in macroeconomics. Explain how inflation can be defined. Also, explain there can
Question:
Inflation is a central concept in macroeconomics. Explain how inflation can be defined. Also, explain there can be problems in measuring inflation and, hence, how inflation usually is measured in a country. Inflation is important in macroeconomics because it affects society in different ways. Explain how inflation affects society and what problems can occur from inflation. Finally, explain and analyse the following example and at the same time explain real and nominal wages. Assume you are about to negotiate your wages for the coming year. You are aiming at getting an increase in purchasing power of 2.5 percent. Inflation for the coming year is expected to be 1.7 percent. When negotiating your wages – how much are you going to demand in wage increases? Motivate your answer.