Asked by Maria Mendez on Jun 12, 2024
Verified
When inflation causes relative-price variability consumer decisions,
A) are distorted and the ability of markets to efficiently allocate factors of production is impaired.
B) are distorted, but markets are still able to efficiently allocate factors of production.
C) are not distorted, but the ability of markets to efficiently allocate factors of production is impaired.
D) are not distorted and markets are still able to efficiently allocate factors of production.
Relative-price Variability
The fluctuation and differences in price levels of goods and services relative to each other over time.
Efficiently Allocate
The process of distributing resources in a manner that maximizes the effectiveness or utility of their use.
- Evaluate the effects of inflation on consumer decisions and market efficiency.
Verified Answer
FP
Fatima PerezJun 14, 2024
Final Answer :
A
Explanation :
Inflation-induced relative-price variability distorts consumer decisions because it changes the real prices of goods and services unpredictably. This distortion impairs the market's ability to efficiently allocate resources, as both consumers and producers cannot make informed decisions based on stable prices.
Learning Objectives
- Evaluate the effects of inflation on consumer decisions and market efficiency.