ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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It decreases the economic well-being of all members of society proportionally
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It decreases the economic well-being of all members of society equally.
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It increases the economic well-being of net debtors.
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It increases the economic well-being of net creditors.
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Detailed explanation-1: -1. Unanticipated inflation, inflation that is not expected, will redistribute income and wealth. a. Redistribution of income occurs because some wages and salaries increase more rapidly than the price level while other wages and salaries increase more slowly than the price level.
Detailed explanation-2: -Definition. unanticipated inflation. when the price level increases at a faster pace than expected; for example, if you think that the rate of inflation will be 5%, but it turns out to be 8%.
Detailed explanation-3: -The true statement is option d) It refers to an increase in the average level of prices. The inflation over a given period signifies the general increase in the average price level of goods and services.
Detailed explanation-4: -Those that benefit from unanticipated inflation are employees with increasing income and individuals with debt. Unlike banks, debtors paying with a dollar that has a decreased purchasing power, save money on their loans.