Question

A history graduate student in the United States gets an $18,000 stipend per year. The U.S. sees significant inflation. How might the student react?

Answer 1

Answer:

The student might ask for a raise in the stipend.

Explanation:

Inflation in the economy means that the price level will rise. This would lead to a decline in purchasing power. The real income of the student will decline because of the rise in price. In this situation, the student can ask for a raise in stipend proportionate to increase in the price level to counterbalance the inflationary pressures.

Answer 2

Answer:

Ask for a cost-of-living increase to her stipend.