Inflation leads to ________.
A)increased variability of relative prices only when it is anticipated
B)increased variability of relative prices only when it is unanticipated
C)increased variability of relative prices whether inflation is anticipated or not
D)lower variability of the general price level only when it is very high
E)none of the above

Question

Quizplus · Accepted Answer

Inflation causes an increase in the general price level, which can lead to increased variability of relative prices whether inflation is anticipated or not. As the general price level increases, individual prices may adjust at different rates or to different extents, leading to changes in relative prices. Anticipated inflation may allow for more adjustments and less variability in the long run, but in the short term, there is still likely to be some variability.

Inflation Leads to ________