Question

Which of the following is not a cost created by high​ inflation? A. Inflationary impacts are not distributed evenly across the​ population, therefore, inflation causes the economy to redistribute income across households. B. Inflation causes the real interest rate to change which can make it more difficult to borrow and lend money. C. Inflation changes​ firms' prices which causes firms to have to use resources to physically change the marked​ prices, often referred to as menu costs. D. Inflation causes the real wage to fall which means that firms have to pay more for workers.

Answer 1

Answer:

The correct answer is the option A: inflationary impacts are not distributed evenly across the population, therefore, inflation causes the economy to redistribute income across households.

Explanation:

To begin with, inflation is the name that receives, in an economic field, the term that refers to the situation where the economy of a country decreases its purchasing power per unit of money causing a loss of real value in the unit of exchange. Moreover, it affects the economy in many negative ways, such as the reductions of the real value of the wages, causing a more difficult situation for the people to buy the primary groceries. Furthemore, it also increases the opportunity cost of holding money, causing to discourage investment and savings.

Therefore, that it is understandable that the correct answer is the option A, due to the fact that a high inflation do not cause a redistribution in the income of the economy to the households, actually it causes the whole oppositve impact.