8. Following is a list of potential problems that inflation might cause. Use the space on the left to name each of these with the terms used in this chapter.

a. ________ Lenders and workers are reluctant to help firms produce output because the real value of future dollar payoffs is unclear.

b. ________ Workers make decisions on the basis of nominal rather than real wage changes.

c. ________ Unexpected inflation reduces the real value of loan repayments.

d. ________ Firms cannot distinguish whether there is a change in the relative price of their good or a change in the overall price level.

e. ________ Restaurants need to spend resources to alter the prices on their menus.

f. ________ Individuals own stock shares for many years and then sell them and are required to pay taxes on the nominal capital gain.

g. ________ People leave work early to shop before inflation changes prices. L-89