What are the costs to society of inflation? Who is harmed by inflation and who benefits?
What will be an ideal response?
The resources used by people to protect themselves against inflation is the major cost of inflation to society as a whole. There is resource misallocation due to people making decisions based on faulty information about the true rate of inflation. In general, creditors are harmed by unanticipated inflation and debtors benefit.
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In the above figure, is the Fed likely to be afraid that inflation will occur or that a recession will occur? Discuss the appropriate monetary policy that should be made to restore the economy to potential GDP
What will be an ideal response?
Economists believe a volunteer military is likely to
A) cost more than a conscripted military. B) cost taxpayers more than a conscripted military would. C) impose higher costs on military personnel than does a conscripted military. D) increase the percentage of incompetent people in the armed forces.