What is an advantage of mild inflation according to some economists?
A)It helps to close the GDP gap.
B)It reduces the inflation premium.
C)It makes it easier for firms to adjust real wages downward as demand for their products falls.
D)It reduces frictional, structural, and cyclical unemployment in the economy to make the economy more productive.

Question

Quizplus · Accepted Answer

Mild inflation allows firms to adjust real wages downward without cutting nominal wages, which can be difficult due to wage rigidity. This flexibility can help firms manage costs and employment levels more effectively during economic fluctuations.

What Is an Advantage of Mild Inflation According to Some