Based on your current knowledge, which of the following are true of inflation? Check all that apply. D A. Inflation has costs. D B. Inflation means that each dollar buys less than it did in the past. C. Inflation is related to the money supply. Check Answers

## Step 1<br />The problem presents three statements about inflation and asks us to determine which are true. <br /><br />## Step 2<br />Statement A says that inflation has costs. This is true. Inflation can lead to a decrease in the purchasing power of money, which can cause economic instability. It can also lead to uncertainty in the economy, which can hinder investment and economic growth.<br /><br />## Step 3<br />Statement B says that inflation means that each dollar buys less than it did in the past. This is also true. Inflation is a measure of the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. As inflation rises, the value of the currency falls, meaning each dollar can buy less than it did in the past.<br /><br />## Step 4<br />Statement C says that inflation is related to the money supply. This is true as well. Inflation is often caused by an increase in the money supply that outpaces economic growth. When there is more money circulating than there are goods and services available, the value of the money decreases, leading to inflation.