Question

Because of uncertainty about future inflation, the union devotes a large quantity of resources to monitoring inflation indicators in order to maximize its financial position. This illustrates the fact that: Variable inflation is associated with high transaction costs Inflation obscures relative price changes Inflation harms lenders and helps borrowers

Answer 1

Answer:

The answer is: Variable inflation is associated with high transaction costs

Explanation:

Inflation happens when the general prices in an economy rise, so the currency loses purchasing power.

When inflation rises too much (a little inflation, i.e. 1-2% is good) then both businesses and the general public will tend to have less money on their accounts and try to invest on assets that yield them a return. But when they need their money, they have to go through a series of financial transactions from non liquid assets (e.g. bonds, etc.) to liquid accounts (e.g. check account) or vice-versa.