Why Should the Central Bank Aim for a Moderate Rate

question 105

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)to avoid the presumably high costs of lowering inflation to zero

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Definitions:

Date Of Record

The specified date on which a company determines its shareholders of record to receive dividends or the beneficiaries of stock splits.

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock, often entitling holders to dividends before common shareholders.

Earnings Per Share

A financial metric that indicates the portion of a company's profit allocated to each outstanding share of common stock.

Cash Dividends

Distributions of a company's earnings to its shareholders in the form of cash.