Why are economists concerned about inflation?
A) Inflation generally causes unemployment rates to rise.
B) Real GDP is necessarily falling when there is inflation.
C) Inflation lowers the standard of living for people whose income does not increase as fast as the price level.
D) Inflation increases the value of peoples' saving and encourages overspending on goods and services.

Question

Quizplus · Accepted Answer

Economists are concerned about inflation because it lowers the standard of living for people whose income does not increase as fast as the price level. This means that if prices are rising faster than incomes, people will be able to purchase fewer goods and services with their income, which reduces their standard of living. Inflation can also lead to other negative effects such as increased uncertainty, reduced investment, and decreased economic growth.

Why Are Economists Concerned About Inflation