Who gains and who loses during an unanticipated burst of inflation.
Concept introduction:
Inflation: Inflation refers to the continuous increase in the prices of commodities over time. Inflation increases cost of living and reduces
Anticipated Inflation: Anticipated inflation refers to an inflation that is foreseen by people before it occurs. In such a situation, nominal wages, rents etc. rise in line with inflation. Therefore, purchasing power remains constant.
Unanticipated Inflation: Unanticipated inflation refers to an inflation that is not foreseen by people before it occurs. In such a situation, nominal wages, rents etc. remain constant in the face of inflation. Therefore, purchasing power declines.
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