Why Should the Central Bank Aim for Zero Inflation

question 3

Multiple Choice

Why should the central bank aim for zero inflation?

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

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Definitions:

Formal Hierarchy

An organizational structure where individuals are ranked according to levels of authority and responsibility, often visually represented as a pyramid.

External Environment

The outside factors and influences that affect the operation and performance of an organization.

Centralize

Refers to the process of concentrating decision-making authority and control at the top levels of an organization.

Tall Hierarchies

Organizational structures with multiple levels of management and authority, sometimes leading to slower decision-making processes.