Which of the following is not a cost of inflation identified by economists?
A)menu costs associated with more frequent adjustment of prices
B)confusion and inconvenience resulting from a changing value of the unit of account
C)reduced price flexibility
D)arbitrary redistributions of wealth associated with dollar-denominated debts

Question

Quizplus · Accepted Answer

Reduced price flexibility is actually a consequence of inflation, not a cost. Due to inflation, prices become sticky, making it difficult for firms to adjust prices frequently in response to changes in demand and supply conditions. However, this does not directly result in any additional costs. On the other hand, menu costs, confusion and inconvenience, and arbitrary redistributions of wealth are all costs associated with inflation.

Which of the Following Is Not a Cost of Inflation