In a period of rapid, unexpected inflation, resources can be lost
A) when firms use resources to forecast inflation.
B) when firms invest in research and development instead of forecasting inflation.
C) because rapid inflation almost always turns into a hyperinflation.
D) Both answers B and C are correct.

Question

Quizplus · Accepted Answer

During rapid, unexpected inflation, firms may allocate resources to projecting future inflation rates. This can lead to a loss of resources as projections may not be accurate or useful in mitigating the effects of inflation. Investing in research and development, as in choice B, is not necessarily related to the loss of resources during inflation. Hyperinflation, as in choice C, is a drastic form of inflation that may occur in some cases, but is not always the outcome of rapid inflation. Therefore, answer A is the best choice.

In a Period of Rapid, Unexpected Inflation, Resources Can Be