All of the following are reasonable arguments against adopting a zero inflation target EXCEPT that a zero inflation target:

Question

Quizplus · Accepted Answer

The other three options provide valid arguments against adopting a zero inflation target. Option A suggests that a zero inflation target could increase the likelihood of deflation, which could result in a decrease in spending and investment, particularly if individuals and businesses anticipate further price declines. Option B argues that a zero inflation target would make it difficult for the central bank to achieve negative real interest rates, which can further stimulate spending and investment during times of economic stress. Option D suggests that even if the CPI were used to measure price stability, it may not provide accurate information due to measurement problems, such as the substitution bias. However, option C is not a valid argument against adopting a zero inflation target, as such a target could still be consistent with long-run price stability if the target is set at a level that balances the benefits and costs of inflation.

All of the Following Are Reasonable Arguments Against Adopting a Zero