Which two of the following would still be costs of inflation even when inflation rates are perfectly anticipated by markets?a) Shoe leather costsb) Losses to borrowers via higher rates of inflationc) Menu costsd) Lower levels of unemployment

INFLATION

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

Which two of the following would still be ‘costs’ of inflation even when inflation rates are perfectly anticipated by markets?a) Shoe leather costsb) Losses to borrowers via higher rates of inflationc) Menu costsd) Lower levels of unemployment

A	a and c
B	b and d
C	c and d
D	a and b

Explanation:

Detailed explanation-1: -There are five costs of inflation: shoeleather costs, menu costs, relative price variability, tax distortions, and confusion, and inconvenience. Shoeleather costs describe the costs people face when reducing their money holdings.

Detailed explanation-2: -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-3: -demand-pull, cost-push, and. inflation expectations.

Detailed explanation-4: -The Consumer Price Index (CPI) CPI, less food and energy. Personal Consumption Expenditures (PCE) Personal Consumption Expenditures excluding food and energy or “Core PCE” 23-Sept-2019

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ECONOMICS (CBSE/UGC NET)

ECONOMICS

INFLATION