Confusion and inconvenience costs arise when inflation
A)improves the store of value function of money.
B)reduces the real value of the unit of account.
C)introduces tax distortions on capital gains.
D)reduces the real debt burden owed by borrowers.

Question

Confusion and inconvenience costs arise when inflation
A)​improves the store of value function of money.
B)​reduces the real value of the unit of account.
C)introduces tax distortions on capital gains.
D)​reduces the real debt burden owed by borrowers.

Quizplus · Accepted Answer

Inflation reduces the real value of the unit of account, which leads to confusion and inconvenience costs. For example, individuals may have difficulty comparing prices over time and making accurate calculations of purchasing power.

Confusion and Inconvenience Costs Arise When Inflation