Inflation Reduces Economic Efficiency Because It Does Each of the Following

question 139

Multiple Choice

Inflation reduces economic efficiency because it does each of the following EXCEPT:

• A) Distort incentives through interaction with the tax laws.
• B) Obscure information transmitted by prices.
• C) Induce people to minimize cash holdings.
• D) Change relative prices.

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Definitions:

Cash Disbursements

The outflow of cash for expenses or investments, typically detailed in a financial planning or accounting report.

Goods Purchased

Items bought by a company for resale or use in production, contributing to inventory.

Variable Selling Expenses

Costs that fluctuate in direct proportion to changes in sales volume, such as commissions and shipping charges.

Administrative Expenses

Costs related to the general operation of a business, such as salaries of executive personnel, accounting, and human resources.