Which of the following explains why redistribution occurs during inflation?
A)Rising prices fail to signal desirable changes in the mix of output.
B)Because all prices do not change at the same rate,people buy different combinations of goods and services and own different combinations of wealth.
C)Relative prices remain unchanged.
D)All loans are indexed to inflation.

Question

Quizplus · Accepted Answer

During inflation, prices of goods and services rise at different rates. This results in people buying different combinations of goods and services and also owning different combinations of wealth. Thus, redistribution occurs as some individuals benefit from the inflation while others are adversely affected.

Which of the Following Explains Why Redistribution Occurs During Inflation