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The Mirage of Inflation 149lead merely to a sort of backed-up inflation that reduces or concealssome of the earlier consequences at the expense of aggravating thelater ones.)The war contractors and their employees, then, will have highermoney incomes. They will spend them for the particular goods andservices they want. The sellers of these goods and services will be ableto raise their prices because of this increased demand. Those whohave the increased money income will be willing to pay these higherprices rather than do without the goods; for they will have moremoney, and a dollar will have a smaller subjective value in the eyes ofeach of them.Let us call the war contractors and their employees group A, andthose from whom they directly buy their added goods and servicesgroup B. Group B, as a result of higher sales and prices, will now inturn buy more goods and services from a still further group, C. GroupC in turn will be able to raise its prices and will have more income tospend on group D, and so on, until the rise in prices and moneyincomes has covered virtually the whole nation. When the process hasbeen completed, nearly everybody will have a higher income measuredin terms of money. But (assuming that production of goods and serviceshas not increased) prices of goods and services will have increasedcorrespondingly; and the nation will be no richer than before.This does not mean, however, that everyone’s relative or absolutewealth and income will remain the same as before. On the contrary,the process of inflation is certain to affect the fortunes of one groupdifferently from those of another. The first groups to receive the additionalmoney will benefit most. The money incomes of group A, forexample, will have increased before prices have increased, so that theywill be able to buy almost a proportionate increase in goods. Themoney incomes of group B will advance later, when prices havealready increased somewhat; but group B will also be better off interms of goods. Meanwhile, however, the groups that have still had noadvance whatever in their money incomes will find themselves compelledto pay higher prices for the things they buy, which means that