Which one of the following is NOT a cost of inflation?
A) wasted resources associated with price confusion
B) higher tax burdens if tax brackets are not adjusted for inflation
C) wealth redistribution from private citizens to the government
D) an automatic decrease in real wages throughout the period of inflation.

Question

Quizplus · Accepted Answer

Inflation leads to an increase in nominal wages, but if the increase in wages is less than the rate of inflation, then there will be a decrease in real wages. However, this is not an automatic decrease as stated in option D. It depends on the magnitude of the inflation rate relative to the increase in nominal wages. Therefore, option D is not a cost of inflation.

Which One of the Following Is NOT a Cost of Inflation