If all prices and wages in the economy rise by the same percentage during the same time period,inflation does not cause a redistribution of income.

Question

Quizplus · Accepted Answer

If all prices and wages rise by the same percentage, the purchasing power of each individual remains the same, and there is no change in the relative price of goods or services. As a result, there is no change in the distribution of income, and inflation is said to be neutral.

If All Prices and Wages in the Economy Rise by the Same