Question

Most economists agree that modest inflation is desirable over zero inflation because:

a. it helps firms to more easily adjust real wages.
b. it allows a margin of error for those deciding on the money supply
c. it allows the fed to more easily engage in expansionary monetary policy.
d. all of these statements are true.

Answer 1

Most economists agree that modest inflation is desirable over zero inflation because it helps firms to more easily adjust real wages, it allows a margin of error for those deciding on the money supply, it allows the fed to more easily engage in expansionary monetary policy so all of these statements are true.

Modest inflation is having some, but not a lot of inflation. Zero inflation is when a country/market is able to reach a point where there is no inflation at all.