Question

Match the following terms with their definitions. the resources wasted when inflation induces people to reduce their money holdings. the cost of more frequent price changes at higher inflation rates. because prices change infrequently, higher inflation causes relative prices to vary more. Decisions based on relative prices are then distorted so that resources may not be allocated efficiently. the income tax is not completely indexed for inflation; an increase in nominal income created by inflation results in higher real tax rates that discourage savings. inflation decreases the reliability of the unit of account making it more complicated to differentiate successful and unsuccessful firms thereby impeding the efficient allocation of funds to alternative investments. inflation decreases the real value of debt thereby transferring wealth from creditors to debtors. A. Confusion and Inconvenience B. Shoeleather costs C. Relative Price Variability D. Unexpected Inflation E. Menu costs F. Inflation Induced Tax Distortions

Answer 1

Answer:

Explanation:

Match the following terms with their definitions.    

A. Confusion and Inconvenience :inflation decreases the reliability of the unit of account making it more complicated to differentiate successful and unsuccessful firms thereby impeding the efficient allocation of funds to alternative investments.

B. Shoeleather costs : the resources wasted when inflation induces people to reduce their money holdings.

C. Relative Price Variability : because prices change infrequently, higher inflation causes relative prices to vary more. Decisions based on relative prices are then distorted so that resources may not be allocated efficiently.

D. Unexpected Inflation :inflation decreases the real value of debt thereby transferring wealth from creditors to debtors.

E. Menu costs the cost of more frequent price changes at higher inflation rates.

F. Inflation Induced Tax Distortions :the income tax is not completely indexed for inflation; an increase in nominal income created by inflation results in higher real tax rates that discourage savings.