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.

---

Definitions:

Investing Activities

Investing Activities are financial transactions related to the acquisition or disposal of long-term assets and investments not related to the entity's primary operations.

Financing Activities

Transactions that involve raising capital or repaying funds, such as issuing stock or taking out loans.

Operating Activities

Transactions and events that affect net income, related to the primary operations of the business.

Contingent Activities

Contingent activities are actions or events that may occur but their happening is dependent upon certain conditions or situations being met.