Inflation inertia is the tendency for inflation to
A) equal zero.
B) change relatively slowly from year to year.
C) decrease when the Bank of Canada increases interest rates.
D) increase when the Bank of Canada decreases interest rates.
E) redistribute resources to low-spending households.

Question

Quizplus · Accepted Answer

Inflation inertia refers to the persistence of inflation rates over time, meaning that they change relatively slowly from year to year. This can be due to factors such as long-term contracts with fixed prices, expectations of future inflation, and wage and price stickiness. The other answer choices are not accurate descriptions of inflation inertia.

Inflation Inertia Is the Tendency for Inflation to