Inflation Is Problematic If

question 38

Multiple Choice

Inflation is problematic if

• A)it is less than the percentage increase in nominal income.
• B)it is less than the nominal return on saving.
• C)it equals the growth rate of real GDP in the long run.
• D)it distorts relative prices,causing a misallocation of resources.

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Definitions:

Socially Optimal

Refers to a situation where goods or services are produced and consumed at a level that maximizes overall social welfare.

Pollution

The contamination of the environment with harmful or poisonous substances, adversely affecting the health of living organisms and ecosystems.

External Costs

Costs of an economic activity that are not borne by the participants but rather by other people or society at large.

Tax

A compulsory financial charge imposed by a government on individuals or entities to fund various public expenditures.