Inflation exerts significant costs on the economy. Explain how does inflation?

Question

1. causes a misallocation of resources, 2. discourages savings, 3. redistributes wealth from lenders to

Answer 1

Unfortunately, your question is incomplete and has so many hidden assumptions that it is almost impossible to answer. Inflation has not been "exerting" any significant costs on our (US) economy lately, though that may be about to change.

A true economist would reject the idea that it causes a "misallocation of resources," since the economy is the economy, and it allocates resources by operation of its rules, whatever they may be. Whatever is, is right.

Inflation is said to discourage savings because the value of every dollar in savings decreases in value in inflationary times. This ignores interest earned on savings and ignores the fact that any dollar not spent, unless it's value is reduced to zero, is still an asset that is good to have.

Assuming the end of no. 3 is "borrowers," the assumption is that the interest charged by lenders does not include a surcharge for inflation. You obviously have not used a credit card or taken a loan recently, or you would know that lenders are overprotecting themselves by their interest charges.