The problem for a central bank setting a zero inflation policy would be:

Question

Quizplus · Accepted Answer

Setting a zero inflation policy would require firms to cut nominal wages to reduce real wages, which could lead to worker dissatisfaction and potential social and political tensions. It is possible to have zero inflation, but achieving and maintaining it over the long term is challenging. High employment is not necessarily a problem for a central bank setting a zero inflation policy, and economic growth can still occur even with zero inflation.

The Problem for a Central Bank Setting a Zero Inflation