During periods when the inflation rate fluctuates widely,_____.
A)the nominal interest rate and the real interest rate are identical
B)all money prices rise at the same rate,causing relative prices to increase
C)suppliers link the selling prices of their goods to the overall inflation rate
D)uncertainty about changes in relative prices causes a decrease in economic efficiency
E)all money prices increase at the same rate,leaving relative prices constant

Question

Quizplus · Accepted Answer

Uncertainty about changes in relative prices can cause a decrease in economic efficiency as it becomes more difficult for individuals and businesses to make informed decisions about production, consumption, and investment. Fluctuating inflation rates can make it challenging to predict how prices of goods and services will change in the future, which can lead to a decline in economic activity. None of the other options accurately reflect the effects of fluctuating inflation rates.

During Periods When the Inflation Rate Fluctuates Widely,_____