Which of the following is TRUE, if inflation could be always perfectly anticipated?
A)no costs to society arise from inflation
B)there are no shoe-leather costs
C)there are no menu costs
D)currency holders would not experience any loss of purchasing power
E)none of the above

Question

Quizplus · Accepted Answer

Even if inflation could be perfectly anticipated, costs to society would still arise. Shoe-leather costs (the cost of managing cash holdings) and menu costs (the cost of changing prices) would still exist, and currency holders would experience a loss of purchasing power as the value of money decreases, even if they could anticipate the rate of inflation.

Which of the Following Is TRUE, If Inflation Could Be