Which of the following explains why the inflation rate is slow to adjust over time?
A) People can perfectly predict the inflation rate.
B) There are high menu costs of changing prices.
C) Workers respond to nominal wages instead of real wages.
D) Too many shocks exist in an economy.

Question

Quizplus · Accepted Answer

High menu costs of changing prices, such as the cost of printing new menus or updating price tags, can make businesses reluctant to adjust their prices frequently. This can lead to a slow adjustment in the inflation rate.

Which of the Following Explains Why the Inflation Rate Is