Which of the following inflation costs matter even if actual inflation and expected inflation are the same?
A)production costs
B)losses in real income
C)losses in tax revenue
D)menu costs

Question

Quizplus · Accepted Answer

Menu costs refer to the costs that firms incur when they have to constantly adjust their prices to keep up with inflation. Even if actual inflation and expected inflation are the same, menu costs will still be incurred, making option D the correct choice. Production costs may be affected by inflation, but if actual and expected inflation are the same, the impact on production costs may be minimal. Losses in real income and tax revenue are more directly linked to differences between actual and expected inflation.

Which of the Following Inflation Costs Matter Even If Actual