Which of the following statements is not true in an inflationary period?
Answer Details
The statement that is not true in an inflationary period is: "Wages rise simultaneously with prices."
Inflation is a period when the general price level of goods and services increases continuously, resulting in a decline in the purchasing power of money. During this period, wages may increase due to increased labor demand or negotiations by labor unions, but they may not necessarily rise simultaneously with prices.
Inflation is caused by various factors, such as an increase in the money supply, cost-push factors, demand-pull factors, and supply shocks. As the general price level rises, the purchasing power of money diminishes, leading to a reduction in real income for fixed income earners. Inflation also creates a situation where more money is chasing a limited quantity of goods, which results in an excess demand for goods and services over the available supply.