Which Statement Best Describes How the Cost of Unexpected Inflation

question 14

Multiple Choice

Which statement best describes how the cost of unexpected inflation is distributed?

• A) Unexpected inflation has a greater cost for those who borrow than those who save.
• B) Unexpected inflation has a greater cost for those who hold a little money than for those who hold a lot of money.
• C) Unexpected inflation has a greater cost for those whose wages increase by as much as inflation than those who are paid a fixed nominal wage.
• D) Unexpected inflation has a greater cost for savers in high income tax brackets than for savers in low income tax brackets.

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Definitions:

Monetary Policies

Economic strategies, implemented by a central bank, that regulate the amount of money in circulation to control inflation, employment, and economic growth.

Federal Reserve Board

The governing body of the Federal Reserve System, responsible for overseeing the United States' central banking system and setting monetary policy.

Income Tax

refers to a tax levied by governments on the income earned by individuals and entities, which varies depending on the income level and source.

Levied

Imposed (a tax, fee, or fine) by authority or government, usually requiring payment by law.