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If Inflation Were Always Perfectly Anticipated, Then

Question 2

Multiple Choice

If inflation were always perfectly anticipated, then


A) its real costs would exactly equal the inflation rate
B) people would hold less cash but would still suffer losses since money balances are always positive
C) the yield on interest-bearing assets would exactly compensate for losses on non-interest bearing assets
D) unemployment would always be at 4 percent
E) wage indexation would not work

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