For Inflation to Have No Real Effect on the Economy

Multiple Choice

For inflation to have no real effect on the economy, leaving all decisions and their real outcomes unchanged, five conditions must be met. Which of the following incorrectly states one of those conditions?

A) Inflation is universally and accurately anticipated.
B) All savings and money earn the nominal interest rate.
C) Inflation of p0 percent raises the nominal interest rate by p0 above the no-inflation nominal rate.
D) Only nominal interest income is taxable and only the nominal cost of borrowing is tax-deductible.
E) Inflation raises the prices of all goods by the same percentage.