Answer :

The rise in the general price level of the economy is called inflation. Inflation affects every economic unit of the economy- consumers, firms, business units, and the government. But the intensity of the phenomenon is different for everyone. For some groups, this rise in price levels is always compensated. Employees of the Central and State Government officials get an additional payment called Dearness Allowance or DA in compensation for the rise in prices. When prices rise by a certain amount, their salary and benefits also increase as the government compensates them for this rise in prices by paying them more DA. Therefore their income also increases, along with inflation. People doing business will reduce the higher cost of living, by prices of goods they sell. This is highly possible if the person is the only seller of the commodity. People providing services such as dry cleaners, barbers, lawyers or doctors increase their charges and remuneration as the prices increase. Thus, they are also less affected by the inflationary tendencies of the economy. The extremely rich persons, working in the corporate sector are also not affected by rising prices. They also enjoy most of the benefits that a government employee enjoys when the price rises. Also because of the high consumption standards, they are not much affected when the price of the necessities rise.


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