Which of the following is not an example of inflation causing a redistribution of income because the inflation was unanticipated?
A)A firm signs a 3-year contract with a union based on a 2 percent anticipated rate of inflation per year,and the actual rate of inflation ends up being 7 percent per year.
B)A worker receives a raise in salary that is less than the rate of inflation,because management under-predicted inflation.
C)Firms have to hire an extra worker to change prices in its store because of inflation.
D)A bank collects a lower amount of interest from a loan because inflation was under-predicted.

Question

Quizplus · Accepted Answer

Hiring an extra worker to change prices in a store is not an example of inflation causing a redistribution of income because it does not involve the anticipation, prediction, or influence of inflation on specific economic agents. It is simply a cost incurred by the firm due to the need to adjust prices. A, B, and D are examples of inflation causing a redistribution of income because they involve unanticipated changes in inflation that affect economic actors differently than they had expected or planned for, leading to winners and losers in terms of purchasing power, wages, profits, and interest payments.

Which of the Following Is Not an Example of Inflation