State two social benefits of inflation
What will be an ideal response?
The social benefits of inflation are as follows:
a) Inflation caused by money creation acts as an implicit tax. It increases the government's revenue by transferring purchasing power from consumers and producers in an economy to the government.
b) Inflation can temporarily reduce the real interest rate and the real wage rate. This increases an employer's willingness to hire more and produce more.
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Frictional unemployment increases when
A) real GDP decreases and the unemployment rate rises. B) the number of workers who quit one job to find another increases. C) discouraged workers drop out of the work force. D) workers are replaced by machines and the unemployed workers do not have the skills to perform new jobs.
If the absolute value of the price elasticity of demand for a product is greater than 1, then
A) quantity demanded is not very sensitive to price changes. B) demand is elastic. C) demand is unit-elastic. D) demand is inelastic.