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:

Monthly Payments

Regular payments made once a month, often in the context of loans, rent, or subscriptions.

Security Interest

A legal claim or right granted on property or assets as collateral to secure the performance of an obligation, such as repayment of a loan.

Federal Bankruptcy Exemptions

Specific exemptions provided by federal law that allow a debtor to protect certain types of property from being seized and sold off by creditors during the bankruptcy process.

Unsecured Creditors

Creditors who have extended credit without obtaining specific collateral, ranking below secured creditors in claims on assets.