Which of the following is true of expected inflation?
A)It increases the efficiency of the economy.
B)It is more of a problem than unexpected inflation.
C)It results in lower prices over time as people make adjustments.
D)It is not a major problem if people can make the right interest rate and income level adjustments.
E)It is necessarily tied to a decline in purchasing power.

Question

Quizplus · Accepted Answer

Expected inflation is not a major problem if people can make the right interest rate and income level adjustments. When people anticipate inflation, they can make adjustments to their investments, borrowing, and consumption patterns that can help maintain their purchasing power. Inflation becomes a problem when it is unexpected and catches people off guard, making it harder for them to adjust.

Which of the Following Is True of Expected Inflation