Question

Moderate inflation is considered _________________ when the tools of monetary policy can create price stability.

a) Manageable
b) Unavoidable
c) Problematic
d) Advantageous

Answer 1

Moderate inflation is considered manageable when the tools of monetary policy can create price stability.

Step-by-step explanation:

Moderate inflation is considered manageable when the tools of monetary policy can create price stability. The crucial point is that while inflation can be a challenge, if it is kept within moderate levels, generally under 3% per year, it does not necessarily prevent a nation's real economy from growing healthily. In fact, moderate inflation can act as oil for the gears of the labor market by helping to make wages more flexible, as wage stickiness can lead to unemployment. Economic growth can still occur since the negative effects of inflation can be curtailed with appropriate monetary policy.