The largest cost associated with unanticipated inflation is:
A) the menu cost.
B) the distortion of our tax system.
C) the shoe- leather cost.
D) the arbitrary redistribution of income and wealth.

Question

Quizplus · Accepted Answer

Unanticipated inflation causes an arbitrary redistribution of income and wealth, as it benefits debtors by reducing the real burden of their debts, while causing harm to savers and fixed-income earners by reducing the purchasing power of their savings and income. This redistribution is arbitrary as it is unrelated to any productive activity or initiative, and it creates a sense of unfairness and uncertainty that undermines social trust and economic stability.

The Largest Cost Associated with Unanticipated Inflation Is