Scott Mooneyham writes about the problem of grade inflation at UNC here.

Defenders of higher ed often say that grades are higher these days because the students are so much better. The recent National Assessment of Adult Literacy blows that excuse out of the water, as it shows that literacy among college students is low and has been declining. The far more persuasive explanation is Murray Sperber’s “faculty-student non-aggression pact” which posits an implicit deal between professors and students. The former will give light work and high grades, but in return, the students don’t demand much time from the prof and give glowing course evaluations. Also, many professors fear the repercussions of giving students low grades even when richly deserved. It can lead to complaints and unpleasant, time-consuming administrative procedures. Therefore, many profs won’t give any student less than a C, and quite a few don’t grade below B.