If people always perfectly anticipated and adjusted to the inflation rate, then
A)real interest rates would be zero
B)there would be no menu costs
C)they would still have to worry about shoe-leather costs
D)the costs of inflation to society would be zero
E)none of the above

Question

Quizplus · Accepted Answer

Even if people perfectly anticipate inflation, they would still incur shoe-leather costs as they try to minimize cash holdings to avoid the inflation tax on money.

If People Always Perfectly Anticipated and Adjusted to the Inflation