February 1994 LSAT Section 1 Question 14

Once consumers recognize that a period of inflation has begun, there is generally an increase in consumer spending. T...

DianaK on February 7 at 08:57PM

Why A is wrong and E is right

I'm just confused on why E would be the right answer, considering salaries are also increasing during inflation. If salaries are increasing, wouldnt consumers still soend more if their salaries are increasing as well?

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DianaK on February 7 at 08:58PM

More specifically, it says "salaries are not keeping up with the pace" but it says in the stimulus that they are increasing

Emil-Kunkin on February 8 at 03:51AM

If salaries are not keeping pace with inflation then people are earning less in real terms. If prices rose ten percent but my salary only rises 5 percent, I won't be able to afford as much as I did the prior year.
This would explain why people don't make large purchases; they simply are unable to afford it anymore.