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Even perfectly anticipated inflation imposes costs. Why?

A) Menu costs.

B) Some wages will fail to keep up with anticipated inflation.

C) Paper money loses its purchasing power by the rate of inflation.

D) All of the above.

E) A and C only.

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Related questions

Menu costs refer to:

a. the money, time, and opportunity used to change prices to keep pace with inflation.

b. the time, money, and effort one has to spend managing cash in the face of inflation

c. being penalized via taxes for making more money in dollars, even though real purchasing power hasn't changed at all

d. None of these statements is true

Which of the following can help to explain why higher inflation may lead to currency appreciations?

(a) The interest rate is not the prime target of monetary policy.

(b) Most central banks adjust their policy interest rates expressly so as to keep inflation in check.

(c) Central banks increase the money supply leading to overshooting of the exchange rate.

(d) Inflation will increase the purchasing power of a currency.

(e) The world market does not adjust their currency trade to reflect inflation

Larry manages a grocery store in a country experiencing a high rate of inflation. To keep up with inflation, he spends a lot of time every day updating the prices, printing new price tags, and sending out newspaper inserts advertising the new prices. His employees regularly deal with customer annoyance over the frequent price changes. This is an example of the __________ย of inflation.

a. menu costs

b. shoe-leather costs

c. unit-of-account costs

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