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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

Explain the costs and benefits of reducing inflation to zero. Which are temporary and which are permanent?

To determine

Costs and benefits of zero inflation targets.

Explanation

Reducing inflation to zero has the following benefits:

  • It reduces the shoe-leather costs that are associated with reduced money holdings.
  • It reduces the menu costs that result in less adjustment of prices.
  • It decreases the variability of relative prices.
  • It prevents the unintended changes in tax liabilities due to non-indexation of the tax code...

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