ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The most adversely affected groups by inflation is usually the wage earners in the informal sector with a specific wage rate and pensioners with fixed pensions as their income remains the same but due to increase in the general price level their expenditure rises.

Detailed explanation-2: -Inflation affects the poor directly by reducing their purchasing power. These direct effects are much larger than any gain coming from higher economic growth and job gains.

Detailed explanation-3: -Purchasing power from paychecks fell 2.9% for middle-income households in 2022 compared with 2021, while rising 1.5% for the bottom fifth of households and 1.1% for the top, according to the CBO study.

Detailed explanation-4: -When prices of commodities that people ordinarily consume increase, the cost of living goes up. Their income remaining the same, they are able to buy less than before. Thus, their “real” income declines, and living becomes difficult.