An economy experiences a sudden and sustained surge in inflation. Assuming that personal income tax thresholds are not automatically indexed to inflation, which of the following is a direct macroeconomic consequence of this surge?
Fiscal drag, as taxpayers with rising nominal incomes are pushed into higher tax brackets, resulting in an increase in the real tax burden.
A redistribution of real wealth from nominal-rate debtors to creditors.
An increase in the real rate of return on financial savings that yield a fixed nominal interest rate.
An improvement in the international price competitiveness of domestic exports.