Your Friend Shahla Argues That Inflation Is Bad for the Economy

Multiple Choice

Your friend Shahla argues that inflation is bad for the economy because it lowers everyone's purchasing power.How would an economist respond to Shahla's statement?

A) Her statement is true.
B) Her statement is false because inflation redistributes income but does not change the average level of income in the economy.
C) Her statement is true when everyone's nominal income changes by the same amount.
D) Her statement is true when wages and benefits are not indexed to the CPI.
E) Her statement is true only in a closed economy.