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Answer to Question #25688 in Macroeconomics for jenna

Question #25688

Higher-than-expected inflation tends to redistribute purchasing power away from ______ and toward ______.
Answer wage earners and debtors; employers and creditors
employers and creditors; wage earners and debtors
wage earners and creditors; employers and debtors
employers and debtors; wage earners and creditors
Expert's answer
Answer:
Higher-than-expected inflation tends to redistribute purchasing power away from wage earners and creditors and toward employers and debtors.

Explanation:
Two notable problems are associated with inflation--uncertainty and haphazard redistribution. Inflation, especially inflation that varies from month to month and year to year, makes long-term planning quite difficult. Prices, wages, taxes, interest rates, and other nominal values that enter into consumer, business, and government planning decisions can be significantly affected by inflation. Moreover, inflation tends to redistribute income and wealth in a haphazard manner--some people win and some people lose. This redistribution might not be that desired by society, failing to promote any of the basic economic goals of efficiency, equity, stability, growth, or full-employment.

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