Which of the Following Is Not an Example of Inflation

question 278

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 underpredicted 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 underpredicted.
• E)A professional pays more income taxes because tax brackets were not adjusted for inflation.

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Definitions:

Regulation

The process of establishing and enforcing rules and standards to control or govern behavior.

Amygdala

An almond-shaped mass of gray matter inside each cerebral hemisphere, involved with the experiencing of emotions.

Emotion

A complex psychological state involving an experiential, physiological, and behavioral response to a personally significant situation.

Reticular Formation

A network of neurons located in the brainstem that plays a key role in controlling arousal and alertness.