Chapter 3R, Problem 19MCQ

To determine

The costs of inflation.

Explanation of Solution

Inflation represents a general increase in the prices of goods and services in the market, and the inflation rate represents the percentage rise in the overall price level in an economy in a given period of time.

Inflation imposes economic costs on the market. The major economic costs are:

• Unit of account cost
• Shoe-leather cost, and
• Menu cost.

The economy experiences unit-of-account costs of inflation when inflation makes money a less reliable unit of measurement.

Thus, option “a” is correct.