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Why Should the Central Bank Aim for a Moderate Rate

Question 54

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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