True or False?
The statement is true. It may be possible the fix the prices of many goods and services in a situation of on-going inflation. But the consequence will be the inevitable shortages that occur whenever prices are kept below their market equilibrium level. The rationing functions performed by prices have to be performed in other ways, such as lineups for purchase of basic commodities, bribery, black-marketeering, or barter arrangements where, say, a plumber provides free services to the person who can move him up to the top of the queue for new car purchases. All these rationing techniques use up time and effort that could be devoted to producing goods and services. The lower money costs of buying goods and services with price controls come at the expense of higher transactions costs. Market participants will engage in whatever devices they can invent to allocate the limited supplies among competing demands, given the price ceilings imposed by the government.