Regarding inflation, which of the following is a true statement?
A) Unanticipated inflation is a change in the general level of prices that catches most decision makers by surprise.
B) High and variable rates of inflation are easy for decision makers to forecast accurately.
C) High and variable rates of inflation can increase GDP by reducing investment.
D) When decision-makers are able to anticipate slow, steady rates of inflation, prices become more unstable and there is a negative impact on the level of prosperity.

Question

Quizplus · Accepted Answer

Unanticipated inflation is a change in general level of prices that catches most decision makers by surprise. It can lead to inefficient allocation of resources and redistribution of wealth from creditors to debtors. Therefore, it is important for decision makers to anticipate inflation accurately in order to make informed decisions. Option B is incorrect because high and variable rates of inflation are difficult to forecast accurately. Option C is incorrect because high and variable rates of inflation can reduce investment and have a negative impact on GDP. Option D is also incorrect because when decision-makers are able to anticipate slow, steady rates of inflation, it allows them to adjust their economic decisions accordingly, which can lead to greater stability in prices and prosperity.

Regarding Inflation, Which of the Following Is a True Statement