An inflation fallacy is:
A) When prices are falling and the economy is growing.
B) That inflation directly lowers living standards.
C) People think that prices are rising much higher than they actually are.
D) Prices always deflate in a recession.

Question

Quizplus · Accepted Answer

The idea that inflation directly lowers living standards is a fallacy because the relationship between inflation and living standards is more complex than that. While inflation can decrease the purchasing power of money, it can also stimulate economic growth and create employment opportunities. Therefore, it is not accurate to make a direct link between inflation and living standards.

An Inflation Fallacy Is