Even moderate inflation typically:
A) increases real prices.
B) increases the amount of taxes that people pay over time.
C) decreases average household consumption.
D) decreases the number of long-term contracts signed.

Question

Quizplus · Accepted Answer

Moderate inflation increases the amount of taxes that people pay over time because as the prices of goods and services increase, the value of money decreases, and the government collects more taxes on the same nominal income. Option A is incorrect because moderate inflation does not necessarily increase real prices, as prices may be affected by other factors such as supply and demand. Option C is incorrect because moderate inflation may not necessarily decrease average household consumption. Option D is incorrect as moderate inflation does not necessarily decrease the number of long-term contracts signed.

Even Moderate Inflation Typically