Which of the Following Is Not an Example of Inflation

question 7

Multiple Choice

Which of the following is not an example of inflation causing a redistribution of income because the inflation was unanticipated?

• A)A firm signs a 3-year contract with a union based on a 2 percent anticipated rate of inflation per year,and the actual rate of inflation ends up being 7 percent per year.
• B)A worker receives a raise in salary that is less than the rate of inflation,because management under-predicted inflation.
• C)Firms have to hire an extra worker to change prices in its store because of inflation.
• D)A bank collects a lower amount of interest from a loan because inflation was under-predicted.

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Definitions:

Chief Financial Officer

A senior executive responsible for managing the financial actions of a company, including financial planning and risk management.

Double Taxation

A taxation principle referring to income taxes paid twice on the same source of earned income, it can occur when income is taxed at both the corporate level and personal level.

Corporation

A legal entity that is distinct and separate from its owners, capable of owning property, incurring debt, and being sued or suing.

Stockholder

An individual or entity that owns shares in a publicly traded corporation, making them partial owners of the company.