Inflation - inflation expectations

6 important questions on Inflation - inflation expectations

What do businesses and workers usually agree on ahead of time?

Contracts and negotiations often determine wages and sales prices months or years ahead.

What influences the agreed prices during negotiations?

Both sides' expectations of inflation shape the final prices during negotiations.

What happens when low inflation is expected?

People agree to small increases in prices and wages with low inflation expectations.
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What do high inflation expectations lead to in terms of pricing?

Anticipating high inflation results in agreeing to larger increases in wages and prices.

How do people react to expectations of high inflation?

They raise wages and prices to shield against future cost increases.

What effect can adjusting wages and prices for anticipated inflation have?

It may cause an actual increase in inflation due to expectations.

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