Unanticipated inflation is usually viewed as undesirable because it
A)reduces everyone's nominal wages
B)redistributes income and wealth
C)is accompanied by reductions in real GDP
D)usually results in the public sector growing less rapidly than the private sector
E)lets lenders gain at the expense of borrowers

Question

Quizplus · Accepted Answer

Unanticipated inflation redistributes income and wealth in an unpredictable and arbitrary manner. Those who rely on fixed income or savings lose purchasing power, while those who own assets that appreciate during inflation benefit. This distorts relative prices and undermines the market's ability to allocate resources efficiently.

Unanticipated Inflation Is Usually Viewed as Undesirable Because It