8. Here 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.

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

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

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

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

level.

e.

b.

d.

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.

People leave work early to shop before inflation changes prices.