Relative-price variability
A)rises with inflation, leading to an improved allocation of resources.
B)rises with inflation, leading to a misallocation of resources.
C)falls with inflation, leading to an improved allocation of resources.
D)falls with inflation, leading to a misallocation of resources.

Question

Quizplus · Accepted Answer

Relative-price variability tends to increase with inflation, which can distort price signals and lead to a misallocation of resources. This is because inflation can cause prices to change at different rates across various goods and services, making it harder for consumers and producers to make informed decisions.

Relative-Price Variability