An unstable inflation rate
A) always redistributes real income from lenders to borrowers.
B) always redistributes real income from borrowers to lenders.
C) adds to the risk of borrowing and lending and interferes with long-run financial planning.
D) makes goods and services too expensive.
E) always redistributes real income from taxpayers to the government.

Question

Quizplus · Accepted Answer

An unstable inflation rate adds to the risk of borrowing and lending as it becomes difficult for borrowers and lenders to plan long-term financial decisions. The uncertainty regarding inflation rates can lead to inaccurate calculations of future incomes, repayment schedules, returns on investments, and the cost of borrowing.

An Unstable Inflation Rate