Uncertainty costs arise from inflation because inflation makes long-term planning ________ so people respond by ________ investment.
A) more difficult; increasing
B) more difficult; decreasing
C) less difficult; not changing
D) more difficult; not changing
E) less difficult; increasing

Question

Quizplus · Accepted Answer

Inflation makes long-term planning more difficult as future prices and costs become unpredictable. As a result, people respond by decreasing investment to minimize their exposure to potential losses caused by inflation. Therefore, uncertainty costs arise from inflation because people are uncertain about their future income and therefore reduce their investments accordingly.

Uncertainty Costs Arise from Inflation Because Inflation Makes Long-Term Planning