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Canadian Economists Who Favour 'Moderate' Over 'Low' Inflation,that Is,inflation in the Range

Question 167

Multiple Choice

Canadian economists who favour 'moderate' over 'low' inflation,that is,inflation in the range of 3% to 6% per year rather than lower,offer all of the following reasons for their preference EXCEPT


A) low or zero inflation can produce lower economic growth.
B) low inflation impairs real wage flexibility and hence economic efficiency.
C) the central bank looses the ability to fight recessions by cutting the nominal interest rate,when inflation and the nominal interest rate are already low.
D) a rapidly growing economy can be expected to naturally produce some inflation which should not be smothered by reining in the interest rate.
E) businesses are net borrowers and,therefore,dislike low inflation.

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