The cost of inflation to society includes
I. the opportunity costs of resources used by people to protect themselves against inflation.
II. the diversion of productive resources to forecasting inflation.
A) I only
B) II only
C) both I and II
D) neither I nor II

Question

Quizplus · Accepted Answer

Both I and II are correct. The cost of inflation includes the opportunity costs of resources used by individuals and businesses to protect themselves against inflation, such as investing in assets that are less affected by inflation rather than in more productive ventures. It also includes the diversion of resources towards activities like forecasting inflation to mitigate its effects, which could have been used in more productive ways.

The Cost of Inflation to Society Includes