Inflation reduces economic efficiency because it does each of the following EXCEPT:
A) Distort incentives through interaction with the tax laws.
B) Obscure information transmitted by prices.
C) Induce people to minimize cash holdings.
D) Change relative prices.

Question

Quizplus · Accepted Answer

Inflation generally affects all prices proportionally, so it does not inherently change relative prices, which are the prices of goods in comparison to each other.

Inflation Reduces Economic Efficiency Because It Does Each of the Following