Some economists think that even moderate inflation makes it difficult to distinguish relative price changes from changes in the general level of prices and therefore,inflation _______ the efficiency of the market system.

Question

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If moderate inflation makes it difficult to distinguish relative price changes from changes in the general level of prices, it reduces the efficiency of the market system. As a result, the purchasing power of consumers may be eroded, resulting in a decline in consumer welfare. This inefficiency can also lead to misallocation of resources in the economy, as producers may produce less efficient goods due to the price signals getting distorted.

Some Economists Think That Even Moderate Inflation Makes It Difficult