Increases in inflation redistribute resources from ________-spending to ________-spending households and hence, ________ short-run equilibrium output.
A)high; low; increase
B)low; high; increase
C)high; low; decrease
D)low; high; decrease

Question

Quizplus · Accepted Answer

According to the distributional effects, a burst of inflation redistributes resources from relatively high-spending and low saving (less affluent)households toward relatively low-spending and high-saving (more affluent)households. As a consequence, overall spending and the short-run equilibrium output may decline.

Increases in Inflation Redistribute Resources from ________-Spending to ________-Spending Households

Increases in Inflation Redistribute Resources from -Spending to -Spending Households