Question

Inflation is undesirable because it: Multiple Choice always makes the nation poorer. redistributes income from those who can raise prices to those who cannot. distorts the information value of prices. makes everyone worse off.

Answer 1

Inflation is undesirable because it redistributes income from those who can raise prices to those who cannot.

What is inflation?

• In the field of economics, inflation refers to an overall rise in the cost of goods and services throughout a nation.
• Each unit of currency may purchase fewer products and services as the general price level rises, hence inflation is associated with a decline in the purchasing power of money.
• A general increase in prices over time diminishes customers' purchasing power because a constant quantity of money will eventually allow for less consumption.
• Whether inflation is running at 2% or 4%, consumers still lose purchasing power; the higher inflation rate only doubles that loss.
• Those interest rates that are fixed for the duration of the loan, won't fluctuate in line with inflation.

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