Why Should the Central Bank Aim for a Moderate Rate

question 41

Multiple Choice

Why should the central bank aim for a moderate rate, instead of a zero rate, of inflation?

• A) to keep the natural rate of unemployment low
• B) because the social costs of moderate inflation are high
• C) because it is very difficult to maintain a zero rate of inflation in the long run
• D) the benefits of zero inflation are small but the costs of reaching zero inflation are large.

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