Which of the following about inflation is true? (1) Unanticipated inflation is a change in the price level that is widely expected. (2) Decision makers are generally able to anticipate slow steady rates of inflation with a fairly high degree of accuracy. (3) Anticipated inflation is an increase in the price level that comes as a surprise, at least to most individuals. (4) Inflation will increase the prices of goods and services that households purchase but not the wage rates of workers.

Unanticipated inflation can wreak havoc on the economy! When prices rise unexpectedly, it creates uncertainty that can disrupt business planning and consumer behavior. For those with fixed incomes, unanticipated inflation can erode purchasing power, making it harder to afford everyday necessities. Hence, familiarity with how inflation works can help navigate its impacts effectively! In the real world, inflation impacts more than just prices; it affects interest rates, savings, and investments! Savvy investors often seek assets that can outpace inflation, like real estate or stocks. Understanding inflation rates can help individuals and businesses make informed financial decisions and protect their savings from losing value over time. So, keep your eyes on the economic indicators!