Your Friend Shahla Argues That Inflation Is Bad for the Economy

question 28

Multiple Choice

Your friend Shahla argues that inflation is bad for the economy because it lowers everyone's purchasing power.How would an economist respond to Shahla's statement?

• A) Her statement is true.
• B) Her statement is false because inflation redistributes income but does not change the average level of income in the economy.
• C) Her statement is true when everyone's nominal income changes by the same amount.
• D) Her statement is true when wages and benefits are not indexed to the CPI.
• E) Her statement is true only in a closed economy.

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Definitions:

Expert Judgments

are assessments, insights, or decisions made by individuals or groups with specialized knowledge or training in a particular field.

Inference Rules

Rules that govern the logical steps allowing the deduction of conclusions from premises.

Means-end Analysis

A problem-solving strategy that involves breaking down problems into smaller, more manageable parts and addressing these to achieve a desired goal.

Incremental Steps

Small, progressive actions or changes made to gradually achieve a larger goal.