Long-run inflation tends to
A) reduce employment, output, and consumption.
B) reduce consumption, but increase employment and output.
C) increase output and consumption, but reduce employment.
D) increase employment, but reduce output and consumption.
E) reduce output and employment, but increase consumption.

Question

Quizplus · Accepted Answer

Long-run inflation tends to reduce employment, output, and consumption. This is because as prices rise over time, the purchasing power of money decreases, leading to decreased consumption and investment, which can ultimately lead to lower output and employment. Inflation can also lead to higher interest rates, which can discourage borrowing and investment, further reducing economic activity.

Long-Run Inflation Tends to