Question

high and unexpected inflation has a greater cost question 4 options: a) for those whose wages increase by as much as inflation than for those who are paid a fixed nominal wage. b) for savers in high income tax brackets than for savers in low income tax brackets. c) for those who hold a little money than for those who hold a lot of money. d) for those who borrow than for those who save.

Answer 1

High and unexpected inflation has a greater cost for those whose wages increase by as much as inflation than for those who are paid a fixed nominal wage.

Step-by-step explanation:

High and unexpected inflation has a greater cost for those whose wages increase by as much as inflation than for those who are paid a fixed nominal wage. This is because when inflation occurs, the value of money decreases, so if wages do not keep up with inflation, the purchasing power of those wages decreases.

For example, if someone's wages increase by 5% but inflation is 10%, their wages effectively decrease by 5% in real terms.

On the other hand, those who are paid a fixed nominal wage will not experience a decrease in purchasing power because their wages remain the same.