Why is there a resource cost associated with inflation?
A) because unemployment increases when there is inflation
B) because most workers end up working fewer hours during periods of inflation
C) because consumers, workers, and firms devote resources to protecting themselves from the financial costs of inflation
D) because the existence of inflation discourages people from placing their savings in interest-bearing accounts, where it is needed to fund capital investment

Question

Quizplus · Accepted Answer

When there is inflation, consumers, workers, and firms must devote resources to adjust their behavior and protect themselves from the financial costs of inflation. For example, consumers may need to spend more time shopping for bargains, workers may need to negotiate for higher wages, and firms may need to change their prices more frequently. These activities require time and effort that could otherwise be devoted to more productive activities, resulting in a resource cost associated with inflation.

Why Is There a Resource Cost Associated with Inflation