Why Should the Central Bank Aim for Zero Inflation

question 19

Multiple Choice

Why should the central bank aim for zero inflation?

• A) Reducing inflation imposes temporary costs but provides permanent benefits.
• B) Reducing inflation from 2 percent to 0 percent is virtually costless.
• C) The government has indexed tax brackets to prevent the adverse effects of inflation.
• D) The costs of inflation are very high.

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Definitions:

Systematic Desensitization

A therapy technique used to treat phobias and anxiety by gradually exposing the patient to the feared object or context without any danger, in order to overcome their anxiety.

Exposure

A therapeutic technique used to treat anxiety disorders by gradually and systematically exposing the patient to the feared object or context without any danger.

Live Snake

A reptile that is living, as opposed to being depicted in images or as a specimen; often eliciting strong fear or interest reactions in people.

Deep Brain Stimulation

A neurosurgical procedure involving the implantation of a medical device called a neurostimulator, which sends electrical impulses to specific targets in the brain for the treatment of movement and neuropsychiatric disorders.