Which of the following would serve to reduce the costs caused by the variability of inflation?
A) Bracket creep.
B) Seignorage.
C) Indexed wages.
D) Negative real interest rates.
E) Higher capital gains tax.

Question

Quizplus · Accepted Answer

Indexed wages would adjust employee wages to inflation, thus reducing the costs caused by inflation variability. Bracket creep refers to the increase in tax liabilities due to inflation, thus increasing costs. Seignorage refers to the profits made by the government by printing money, but does not directly address inflation variability costs. Negative real interest rates refer to the interest rates adjusted for inflation, which may worsen the effects of inflation variability. Higher capital gains tax may address tax revenue but does not directly address inflation variability costs.

Which of the Following Would Serve to Reduce the Costs