If the yearly inflation rate could be always be perfectly anticipated, then
A)currency holders would still have a negative rate of return
B)menu costs would still arise
C)people would still have to worry about shoe-leather costs
D)the costs of inflation to society would be small
E)all of the above

Question

Quizplus · Accepted Answer

If the yearly inflation rate could always be perfectly anticipated, currency holders would still face a negative rate of return due to the decreasing purchasing power of money, menu costs would still arise from the need to frequently update prices, and people would still incur shoe-leather costs from trying to hold less cash and make more frequent trips to the bank. Therefore, even though the costs of inflation to society would be reduced because people could adjust their behavior and expectations accordingly, these costs would not be eliminated entirely, making all of the statements correct.

If the Yearly Inflation Rate Could Be Always Be Perfectly