A cost of inflation is that it:
A)makes everyone poorer.
B)makes the poor poorer and the rich richer.
C)reduces the informational content of prices.
D)it raises real interest rates.

Question

Quizplus · Accepted Answer

Inflation can distort the information conveyed by prices because it affects the purchasing power of money. When prices rise due to inflation, it becomes harder to discern whether the price increase is due to actual changes in supply and demand or merely the inflationary effect, thus reducing the informational content of prices.

A Cost of Inflation Is That It