ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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shoeleather costs.
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costs due to confusion and inconvenience.
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arbitrary redistributions of wealth.
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costs due to inflation induced tax distortions.
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menu costs.
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Detailed explanation-1: -Rapidly rising prices are harming American families, eroding the value of their paychecks, and increasing the financial strain of buying everyday goods like groceries and gasoline. Inflation is also eroding the value of savings, making it harder for Americans to build wealth.
Detailed explanation-2: -For example, if the Federal Reserve (Fed) or European Central Bank (ECB) doubled the supply of money in the economy, the long-run prices in the economy would tend to increase dramatically. This is because more money circulating in an economy would equal more demand and spending by consumers, driving prices up.
Detailed explanation-3: -Long-lasting episodes of high inflation are often the result of lax monetary policy. If the money supply grows too big relative to the size of an economy, the unit value of the currency diminishes; in other words, its purchasing power falls and prices rise.
Detailed explanation-4: -According to monetarists, a rapid increase in the money supply can lead to a rapid increase in inflation. This is because when money growth surpasses the growth of economic output, there is too much money backing too little production of goods and services.