One possible benefit of moderate inflation is:
A) a reduction in boredom attributable to the changing prices.
B) the elimination of menu costs.
C) better functioning labor markets.
D) increased certainty about the future.

Question

Quizplus · Accepted Answer

Moderate inflation can help labor markets function better by allowing for more flexibility in wage and price adjustments. This means that in times of economic change or uncertainty, employers can adjust wages without the need for negotiations or strikes, which can lead to a more efficient allocation of labor resources. Option A is not a valid benefit of inflation, and option B relates to the concept of menu costs, which are the costs of updating prices to reflect changes in inflation, and moderate inflation does not eliminate these costs. Option D is also not a valid benefit, as inflation can increase uncertainty about future prices and the value of money.

One Possible Benefit of Moderate Inflation Is