Suppose Malan snack bar prints a new price menu every year in 65438+ 10, and keeps the price unchanged at other times of the year. Without inflation, the relative price of Malan-its food price compared with other prices in the economy-will remain unchanged for one year. In contrast, if the inflation rate is 12% per year, the relative price of Malan will automatically decrease by 1% per month. In the first few months after the new menu was printed, the price of restaurants was relatively high, but it was relatively low in the next few months. In addition, the higher the inflation rate, the greater this spontaneous change. Therefore, because the price changes only once in a period of time, the change of relative price caused by inflation is greater than that without inflation.

Market economy relies on relative prices to allocate scarce resources. Consumers decide what to buy by comparing the quality and price of various goods and services. Through these decisions, they decide how to distribute scarce factors of production between individuals and enterprises. When inflation distorts relative prices, consumers' decisions are also distorted, and the market cannot allocate resources to the best use.