Question

Which of the following is true?a. Anticipated inflation is an increase in the price level that comes as a surprise, at least to most individuals.b. Unanticipated inflation is a change in the price level that is widely expected.c. Decision makers are generally able to anticipate slow steady rates of inflation with a fairly high degree of accuracy.d. Inflation will increase the prices of goods and services that households purchase but not the wage rates of workers.

Answer 1

Answer:Answer:

C) Decision makers are generally able to anticipate slow steady rates of inflation with a fairly high degree of accuracy

Explanation:

Inflation from definition: Inflation is the persistent rise in the general price of good and services. So one of the factors that can help anticipate and manage inflation is:

Money Supply and Inflation

The quantity theory of money means that as money supply is increases it will lead to increase in inflation. This is because of the correlation between money supply and inflation, illustrated in the equation MV=PT where V and T are autonomous of the Money Supply. Nevertheless, in practise empirical evidence has shown that increased money supply doesn’t certainly cause inflation, as there are other components differentiating money supply and inflation.

But the answer that decision makers are generally able to anticipate slow steady rates of inflation with a fairly high degree of accuracy is because with the money slow level, they can anticipate and manage inflation