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.

---

Definitions:

Market Price

The present cost at which a service or asset is available for purchase or sale in the open market.

Paid-In Capital

The amount of capital provided by shareholders in exchange for shares of a company's stock.

Stock Split

A corporate action that increases the number of a corporation's outstanding shares by dividing each share, which in turn reduces the price per share.

Market Value

The ongoing value for buying or selling an asset or service in a market setting.