High unemployment negatively affects people, which is not applicable …show more content…
Inflation
Numerous findings strongly emphasize the importance of inflation while examining the well-being and welfare correlations. Undoubtedly, both inflation and unemployment lower happiness. According to studies conducted by Blanchflower (2008), while the least educated and retired are mostly concerned about unemployment, young people are distressed more about rising inflation.
A surprising finding was performed by Frey&Stutzer which stipulated that, for 12 European countries in the period from 1975 to 1991, an increase of inflation by 5 pp (e.g from 13% to 18%) decreases average happiness by 0.05 units of satisfaction, meaning shifting people from “fairly satisfied”, to “not very satisfied” category. Another astonishing result, which reflects the high impact of inflation on happiness, was drawn from the study of Di Tella et al., 2001, which showed that in order to offset growth-effect of inflation by 1.7 pp-the unemployment should be lowered by 1pp: ”thus if unemployment rises by 5pp (e.g from 3% to 8%), the inflation rate must decrease by 8.5 pp (e.g from 10% to 1.5% per year) to keep the population equally …show more content…
On one hand, one says (e.g. James Kielkopf) that inflation has very little effect on poor as by definition the poor lack money, so they are mostly unaffected by liquid asset depreciation, that is caused by inflation, while richer citizens, on contrast, facing inflation are greatly discouraged to invest their cash in real capital expenditures-building machines and factories and making which in turn, employs more people and thus reduces the poverty of unemployed poor. On the other hand, the idea which was developed in The Economist magazine (July 2011) uphold the following-two areas of our day-to-day expenditures, which were affected by inflation are food and energy-which, in turn, absorb “a higher proportion of the spending basket” of the poor, consequently making poor people to be hit by inflation the most. Richer people on average-have more of their savings in equities and property, asset classes that are better protected against inflation, than on the cash deposits which middle-income savers might depend on for the bulk of their interest income (single pensioners suffer the