Which of the following is not a cost created by high inflation?

A. Inflation causes the real wage to fall which means that firms have to pay more for workers.

B. Inflation causes the real interest rate to change which can make it more difficult to borrow and lend money.

C. Inflationary impacts are not distributed evenly across the population, therefore, inflation causes the economy to redistribute income across households.

D. Inflation changes firms' prices which causes firms to have to use resources to physically change the marked prices, often referred to as menu costs.

Question

Business

Ivan Owens

23 May, 01:55

Which of the following is not a cost created by high inflation?

A. Inflation causes the real wage to fall which means that firms have to pay more for workers.

B. Inflation causes the real interest rate to change which can make it more difficult to borrow and lend money.

C. Inflationary impacts are not distributed evenly across the population, therefore, inflation causes the economy to redistribute income across households.

D. Inflation changes firms' prices which causes firms to have to use resources to physically change the marked prices, often referred to as menu costs.

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Answers (1)

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August · Answer 1

Which of the following is not a cost created by high inflation?

A. Inflation causes the real wage to fall which means that firms have to pay more for workers.

B. Inflation causes the real interest rate to change which can make it more difficult to borrow and lend money.

Explanation:

High inflation may also lead to higher borrowing costs for businesses and people needing loans and mortgages as financial markets seek to protect themselves against rising prices and increase the cost of borrowing on short and longer-term debt.