Q. Which of the following is/are valid macroeconomic consequences of high inflation?
1.It redistributes income from people on fixed incomes to those with variable incomes.
2.It increases exports due to rising domestic prices.
3.It adds inefficiencies in the market, discouraging long-term planning and investment.
Answer: B
Notes:
Explanation:
- Inflation hurts people on fixed incomes (like pensioners) and benefits those with variable incomes, causing redistributive effects.
- High inflation makes exports costlier, reducing export competitiveness and increasing imports, which leads to a trade deficit.
- Inflation causes market inefficiencies, making it hard for businesses to budget or invest long-term.
