If some goods' prices adjust more quickly than others during a period of high inflation, there is:
A) a perfect short-run allocation of resources.
B) a short-run misallocation of resources.
C) no inflation.
D) a hyperinflation.
E) a deflation.

Question

Quizplus · Accepted Answer

If some goods' prices adjust more quickly than others during a period of high inflation, there is likely to be a short-run misallocation of resources. This is because prices of some goods will increase faster than others, leading to changes in consumption patterns that may not reflect consumers' true preferences. Additionally, firms may produce more of the goods with rapidly increasing prices in order to increase profits, even if there is not necessarily increased demand for those goods. This can lead to a misallocation of resources as some goods are overproduced and others are underproduced, leading to inefficiencies in the economy.

If Some Goods' Prices Adjust More Quickly Than Others During