What are the costs to society of inflation? Who is harmed by inflation and who benefits?
What will be an ideal response?
The resources used by people to protect themselves against inflation is the major cost of inflation to society as a whole. There is resource misallocation due to people making decisions based on faulty information about the true rate of inflation. In general, creditors are harmed by unanticipated inflation and debtors benefit.
You might also like to view...
If the monthly unemployment rate increase mentioned in the Application wound up being a permanent and not temporary change, the best economic decision by the committee would most likely be to
A) decrease the money supply to stimulate the economy. B) not change monetary policy. C) decrease the money supply to slow the economy down. D) increase the money supply to stimulate the economy.
Refer to Figure 13-14. Which of the following statements describes the firm depicted in the diagram?
A) The firm is making no economic profit and will exit the industry. B) The firm is in long-run equilibrium and is breaking even. C) The firm is suffering an economic loss by producing at Q0 but will break even if it increases its output to Q1. D) The firm achieves productive efficiency by producing at Q0.
The primary benefit of a monetary system of exchange compared to a barter system is the increased
a. ability to record transactions. b. time necessary to find trading partners. c. time devoted to shopping. d. efficiency in arranging transactions.
Given the following formula for the Taylor rule:Target federal funds rate = natural rate of interest + current inflation + 1/2(inflation gap) + 1/2(output gap)Every one percent increase in the rate of inflation will:
A. increase the real federal funds rate by 1.5%. B. increase the real federal funds rate by 0.5%. C. increase the target federal funds rate by 1.5%. D. increase the target federal funds rate by 1.5% and increase the real federal funds rate by 0.5%.