Inflation ______ the variability of relative prices and ______ allocative efficiency.
A) increases; increases
B) increases; decreases
C) decreases; decreases
D) decreases; increases

Question

Quizplus · Accepted Answer

Inflation increases the variability of relative prices as some prices may increase more than others, causing distortions in the market. This decreased allocative efficiency as resources may not be allocated to their most productive use.

Inflation ______ the Variability of Relative Prices and ______ Allocative

Inflation the Variability of Relative Prices and Allocative