Higher inflation
A)causes firms to change prices less frequently and makes relative prices less variable.
B)causes firms to change prices less frequently and makes relative prices more variable.
C)causes firms to change prices more frequently and makes relative prices less variable.
D)causes firms to change prices more frequently and makes relative prices more variable.

Question

Quizplus · Accepted Answer

Higher inflation leads to frequent changes in prices as firms try to keep up with the increase in costs. This, in turn, makes relative prices more variable as the prices of some goods and services increase more than others, leading to changes in the economy's relative price structure.

Higher Inflation