The student react: Ask for a cost-of-living increase to her stipend.
"Information available from the question"
In the question:
An economics graduate student in the united states earns an $18,000 stipend per year. the u.s. sees significant inflation.
How might the student react?
Now, According to the question:
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.
Hence, Ask for a cost-of-living increase to her stipend.
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