Unanticipated inflation results in

Question

Quizplus · Accepted Answer

Unanticipated inflation refers to unexpected and sudden increases in the general price level of goods and services that result in a decrease in the purchasing power of money. Since wages are usually fixed in the short run, unanticipated inflation causes a decrease in real wages as the purchasing power of each dollar earned by the worker decreases. Nominal wages may remain the same or even increase depending on labor market conditions, but the increase in money wages is offset by the increase in prices, leading to a decline in real wages. Therefore, the correct answer is C) decreasing real wages.

Unanticipated Inflation Results in