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It is difficult to engage in long-term financial planning when inflation is: a. high and erratic....

It is difficult to engage in long-term financial planning when inflation is:

a. high and erratic.

b. low and stable.

c. accounted for through indexing.

d. predictable.

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Answer #1

The correct answer is 'Option A'.

The financial planning cannot be done for the long periods if the inflation rate is high and eratic. This is because the high fluctuations in the inflation make it unpredictable for the investors or firms to analyze the inflation in future periods. So, the correct value of assets or anything else cannot be estimated in monetary terms for future periods. Therefore, financial planning is difficult for the long-run if the inflation is high and eratic.

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