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Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509
BuyFind

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509

Solutions

Chapter
Section
Chapter 17, Problem 6CQQ
Textbook Problem
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If an economy always has inflation of 10 percent per year, which of the following costs of inflation will it NOT suffer?

a. shoeleather costs from reduced holdings of money

b. menu costs from more frequent price adjustment

c. distortions from the taxation of nominal capital gains

d. arbitrary redistributions between debtors and creditors

Expert Solution
To determine
Inflation and costs.

Explanation of Solution

Option (d):

It is the unexpected changes in prices (unexpected inflation) that redistribute wealth among debtors and creditors. Thus, option‘d’ is correct.

Option (a):

Inflation involves to shoe-leather costs that reduce the money holdings of the people. Thus, option ‘a’ is incorrect...

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Chapter 17 Solutions

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