Final answer:
An increase in the CPI is a measure of inflation rather than a cost of it, while the other options mentioned are actual costs associated with inflation.
Step-by-step explanation:
The question asks which of the following is not a cost of inflation. The correct answer is B. An increase in the CPI (Consumer Price Index). An increase in the CPI is a measure of inflation, but not a cost of it. On the other hand, intentional redistributions of purchasing power, blurred price signals, and resources being diverted toward addressing inflation-related issues are indeed costs caused by inflation.
Inflation can lead to unintended redistributions of purchasing power as those with cash or fixed-income investments find their real returns diminish when inflation rates exceed the returns on their investments. Meanwhile, blurred price signals can affect market efficiency as businesses and consumers struggle to differentiate between actual changes in supply and demand and those changes reflected by inflation. Additionally, resources might be misallocated as efforts are directed toward combating inflation instead of fostering innovation.