Which of the following could the government do to decrease the costs of inflation without lowering the inflation rate?
A)avoid unexpected changes in the inflation rate
B)rewrite the tax laws so that nominal gains were taxed instead of real gains
C)make policy that would discourage firms from issuing indexed bonds
D)pass legislation to discourage inflation-adjusted work contracts

Question

Quizplus · Accepted Answer

By avoiding unexpected changes in the inflation rate, the government can reduce uncertainty and the associated costs of inflation, such as menu costs and the inflation risk premium, without necessarily lowering the inflation rate itself.

Which of the Following Could the Government Do to Decrease