Do Workers Understand Inflation? Explain.

Please explain thoroughly with explanations and thoughts.

Reference Link;

https://media.pearsoncmg.com/ph/bp/bp_hubbard_econ_5/MTC/ch28/MTC2801.html

In addition to the first question, please respond to the two posts on the bottom on your thoughts about if workers understand inflation? Do you agree, disagree with this person's post? Why? Please include all of your thoughts and not short explanations.

Post #1 to respond to;

If firms have a better ability to correctly and more accurately forecast the inflation rate than workers do, then the short-term Phillips Curve will not be a vertical curve. The higher the inflation rate is, the lower the rate of unemployment is if firms accurately forecast inflation better than workers do. A survey conducted on inflation found that while many economists believe that increased inflation will lead to increased wages, most of the working general public believed the opposite would occur. Those of the working class that were surveyed believed that it would take years for their wages to catch up to the increased inflation, or that this would not happen at all. If workers fail to understand that increased inflation will lead to increasing wages over time, then when short-run inflation increases, then firms can increase wages within inflation so that their workers will not quit. With this being said, the survey conducted was indeed informative regarding the downward slope of the Phillips Curve. With this, it can be noted that workers do not necessarily understand inflation, as they do not understand how the value changes with it. The working class does not seem to understand that even though inflation increases, so does their wages.

Post #2 to respond to;

If workers have less ability than firms to accurately forecast the inflation rate the short term, Phillips cure will not be vertical because the workers may not have all of the information to do so. There are a lot of factors that go into the forecast of the inflation rate and to do so accurately, firms have more technology and information at their disposal. A higher inflation rate can lead to lower employment if firms forecast the inflation rate more accurately than workers do. Firms are also able to see data that most regular workers are unable to see giving them an advantage when it comes to accurately forecasting the inflation rate. Most economists believe that the increase of inflation will bring higher wages, the general public believes that it does not lead toa quicker rise in wages, which I believe to be true in most cases when you look at the history of when our inflation rate has gone up. The workers also believed that it would take years for the wages to increase with inflation as well as most likely never to see an increase in wages at all due to a rise in inflation. On the other hand, the firm is able to give raises under the rising inflation to avoid loosing workers during these rises in inflation.