When inflation causes relative-price variability consumer decisions,
A)are distorted and the ability of markets to efficiently allocate factors of production is impaired.
B)are distorted, but markets are still able to efficiently allocate factors of production.
C)are not distorted, but the ability of markets to efficiently allocate factors of production is impaired.
D)are not distorted and markets are still able to efficiently allocate factors of production.

Question

Quizplus · Accepted Answer

Inflation-induced relative-price variability distorts consumer decisions because it changes the real prices of goods and services unpredictably. This distortion impairs the market's ability to efficiently allocate resources, as both consumers and producers cannot make informed decisions based on stable prices.

When Inflation Causes Relative-Price Variability Consumer Decisions