High and Uncertain Inflation Is Damaging to the Economy Because

question 109

Multiple Choice

High and uncertain inflation is damaging to the economy because

• A)the price system is no longer capable of effectively signalling changes in relative scarcity through changes in relative prices.
• B)individuals who receive their incomes in fixed nominal terms are made worse off.
• C)there can be unexpected reallocations of real income between workers and firms.
• D)there can be unexpected reallocations of real income between borrowers and lenders.
• E)All of the above.

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Definitions:

Lithium

A chemical element used especially in the form of its salts as a mood-stabilizing medication, primarily in the treatment of bipolar disorder.

Prozac

A brand name for fluoxetine, a selective serotonin reuptake inhibitor (SSRI) used to treat depression and a variety of other mental health conditions.

Celexa

A prescription medication belonging to the class of drugs known as selective serotonin reuptake inhibitors (SSRIs), used to treat depression.

Clomipramine

A tricyclic antidepressant medication primarily used to treat obsessive-compulsive disorder.