Which of the following is a macro consequence of a sudden increase in the average level of prices?
A)People on fixed incomes benefit.
B)Uncertainty is greater.
C)Nominal income falls by a smaller percentage than real income.
D)People lengthen their time horizons.

Question

Quizplus · Accepted Answer

A sudden increase in the average level of prices leads to greater uncertainty as it disrupts the balance of supply and demand, making it difficult for businesses and individuals to plan for the future. People on fixed incomes do not benefit, as their purchasing power decreases with the increase in prices. Nominal income falls by a smaller percentage than real income only if wages and salaries rise in response to the increase in prices, which may not always be the case. People may or may not lengthen their time horizons in response to the increase in prices, so this option is not a macro consequence.

Which of the Following Is a Macro Consequence of a Sudden