Which of the following is NOT an effect of expected inflation?
A) causes lower real wages.
B) leads to shoeleather costs.
C) increases menu costs.
D) leads to taxing of nominal capital gains that are not real.

Question

Quizplus · Accepted Answer

Expected inflation primarily affects the economy by increasing costs associated with changing prices (menu costs) and the costs of holding money (shoeleather costs), as well as by affecting the taxation of nominal gains. It does not directly cause lower real wages; real wages are influenced by a variety of factors including productivity, labor supply and demand, and bargaining power. Inflation expectations might indirectly affect real wages if they lead to higher nominal wage demands, but the direct effect of expected inflation is not to lower real wages.

Which of the Following Is NOT an Effect of Expected