Inflation:
A) Distorts the allocation of scarce resources
B) Encourages savings
C) Discourages increased consumption
D) All of the above
E) None of the above

Question

Quizplus · Accepted Answer

Inflation distorts the allocation of scarce resources by changing the relative prices of goods and services, which can lead to inefficient investment and consumption decisions. It typically discourages savings due to the erosion of purchasing power over time and encourages increased consumption, especially if consumers expect prices to continue rising.