Expected inflation is not seen as a major problem if individuals and businesses can adjust their interest-rate expectations and income levels accordingly. This allows for planning and adjustments to mitigate the negative effects of inflation.

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Expected Inflation

Question 90

Multiple Choice

Expected inflation

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

Correct Answer: