Question

After a prolonged period of high inflation the government of Oceania decides to set a target of 0% inflation going forward. As the new assistant economic minister, you are tasked with critiquing this policy, which criticism of the 0% inflation target is plausible yet controversial among economists? Too little inflation interferes with the downward adjustment of real wages. A 0% inflation target could lead to deflation O Moderate to high inflation is popular among consumers

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The most plausible and controversial argument is that moderate to high inflation is popular among consumers. A low inflation rate may reduce the cost of living and real estate prices to many consumers but a very low inflation also creates a debt burden on the borrowers as it becomes very costly for them to pay back their debts. A moderate inflation helps reduce the burden of debt upon many consumers while increasing the cost of living marginally. Therefore, neither too high nor too low inflation is preferred by consumers.

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  • After a prolonged period of high inflation the government of Oceania decides to set a target...

    After a prolonged period of high inflation the government of Oceania decides to set a target of 0% inflation going forward. As the new assistant economic minister, you are tasked with critiquing this policy. Which criticism of the 0% inflation target is plausible yet controversial among economists? Too little inflation interferes with the downward adjustment of real wages. 0 A 0% inflation target could lead to deflation. O Moderate to high inflation is popular among consumers

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