THE EFFECT OF INFLATION ON INCOME MEASUREMENT AND THE EFFECT ON LOW INCOME EARNERS
CHAPTER ONE
INTRODUCTION
The tendency of price to rise, and of the value of money to fall is known as inflation. One of the main objectives of any responsible government is to control the rate of inflation because of its undesirable effect on the economy. In most developed countries, the economic specter of the inter-war period was the demoralizing level of unemployment. The worry of unemployment has given way to a concern over inflation. Most economic policy may be seen as a continued fight to sustain increase and the distortions created by them.
One of the most important objectives of both individual and corporate firm is the generation of sufficient income to meet inflation. In the foregoing contact, values placed on reputed income will be examined with reference to inflation is a global pheromone which may be defined as continuous increase in prices.
When there is too much money in circulation, people easily get much money to spend let us imagine a primitive economy producing food as its only commodity and we will assure that the money supply in such economy consists of N10 (Ten Naira) notes, each of which can be used only ones. In year one 10,000 units of food are sold at N10, each and consumed if in year two the same amount of food is produced but the supply of money is increased to N20,000 then people with access extra money will be prepared to offer more for each unit and prices will definitely rise towards N20 each. If on the other hand, the supply of food has increased by 100 percent as well as we would expect prices to have stabilized. The relationship is far more complex than this suggests, but the supply of income is an important factor to be considered in the question of inflation. This has been thought to have been, when financial accountants do while presenting a financial report.
