MACROVISION · ECONOMIC LAB
What happens to purchasing power when unemployment and prices change?
Compare two hypothetical scenarios for an example household. You can change the assumptions and see the accounting effect at once.
An accounting illustration only — not a forecast, not a calibrated macro model and not financial advice. The unemployment rate is shown as scenario context and does not change income directly in the calculation.
Rent and mortgage payments are set in shekels and do not fall with prices. So someone living on a benefit indexed to goods prices who rents can lose when prices fall. The research finding →
Illustrative starting values
Scenario A
Scenario B
How are the results calculated?
Nominal income = base income × (1 + income change) + benefit. Real income in today’s prices = nominal income ÷ (1 + price change). Basket cost = base basket × (1 + price change). Monthly balance = nominal income minus the basket cost.
The scenarios leave out responses of wages, supply, taxation, the government budget and capital markets. The benefit is not examined here in terms of its financing. The unemployment rate is not a statistical estimate.