Zero inflation
A)would limit the flexibility of the labor market and so could at times raise unemployment.
B)might be dangerous because it could lead to rapidly increasing prices.
C)would make it easy for the Central bank to create negative real interest rates.
D)is impossible to achieve in the real world.

Question

Quizplus · Accepted Answer

Zero inflation could limit the flexibility of the labor market because it reduces the ability to adjust real wages downward in a downturn without cutting nominal wages, which employers are often reluctant to do. This could lead to higher unemployment during economic slowdowns.

Zero Inflation