Which of the Following Is Not an Example of Inflation

question 76

Multiple Choice

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

• A) Firms have to hire extra workers to change prices because of inflation.
• B) A firm signs a 4-year contract with a union based on a 3% expected rate of inflation per year, and the actual inflation rate ends up being 5% per year.
• C) An employee receives an increase in salary that is less than the rate of inflation because management under-predicted inflation.
• D) A bank collects a lower amount of interest from a loan because inflation was predicted to be 2% but was actually 4%.

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Definitions:

Social Frameworks

Structured patterns and systems within which society organizes, interprets, and interacts, encompassing institutions and cultural norms.

Power Distance

A cultural dimension that reflects the extent to which less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally.

Formality

The condition or quality of being done in accordance with established conventions or protocols, often marked by seriousness or ceremoniousness.

Individualism

A social and cultural ethos that emphasizes the moral worth of the individual, encouraging self-reliance and personal achievement.