All of the Following Are Reasonable Arguments Against Adopting a Zero

question 23

Multiple Choice

All of the following are reasonable arguments against adopting a zero inflation target EXCEPT that a zero inflation target:

• A) makes the undesirable effects of deflation more likely.
• B) prevents the central bank from achieving a negative real interest rate.
• C) is not consistent with long-run price stability.
• D) based on the CPI would not generate "true" price stability because of CPI measurement problems.

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