Assuming all else equal,inflation can ________.
A) reduce the real interest rate and increase the real wage rate
B) increase the real interest rate and reduce the real wage rate
C) reduce both the real interest rate and the real wage rate
D) increase both the real interest rate and the real wage rate

Question

Quizplus · Accepted Answer

Inflation reduces the value of money, which leads to a decrease in the purchasing power of both wage earners and lenders. As a result, inflation reduces the real interest rate and the real wage rate. Therefore, option C is correct.

Assuming All Else Equal,inflation Can ________