Compared to Periods of Lower Rates of Inflation, During a Hyperinflation

question 60

Multiple Choice

Compared to periods of lower rates of inflation, during a hyperinflation all of the following occur except:

• A) shoeleather costs increase.
• B) menu costs become larger.
• C) relative prices do a better job of reflecting true scarcity.
• D) tax distortions increase.

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Definitions:

Elasticities

Measures of how much the quantity demanded or supplied of a good responds to changes in price, income, or other factors.

Demand

The total quantity of goods or services that consumers are willing and able to purchase at a given price level in a market.

Supply

The total amount of a specific good or service that is available to consumers in a market at a given time and price.

Elastic

Describes a situation in which a change in price leads to a significant change in the quantity demanded or supplied of a good or service.