(See related pages)
|
|
|
| Page 230 Deflation helps those whose incomes are fixed (or whose incomes do not fall) in nominal terms. For these people, real incomes increase, because nominal incomes stay the same while prices fall. Deflation that is unexpected also helps lenders. This is because actual real interest rates end up being higher than expected real interest rates. Others are hurt by deflation. Because deflation reduces business prospects, not only are entrepreneurs hurt, but also those who lose their jobs as a result of the self-feeding effects of deflation. Borrowers, too, are hurt by unexpected deflation. Page 237 The negligible impact of minimum wages on skilled workers is due to the fact that wages for these workers are virtually always higher than the minimum wage. For these workers, the minimum wage is an example of a price floor set below the equilibrium price. |