Final answer:
Central banks aim to prevent deflation through expansionary monetary policy and generally prioritize fighting inflation, as suggested by the neoclassical model of economics, to maintain a stable economic environment for growth.
Step-by-step explanation:
The statement that central banks should be vigilant against deflation is true. Deflation, a decrease in the general price level of goods and services, can lead to reduced consumer spending, which in turn can hurt economic growth. While deflation doesn't always signal an economic disaster outside of severe cases like the Great Depression, it is a threat that central banks take seriously. By utilizing expansionary monetary policy, such as lowering interest rates and increasing the money supply, central banks strive to prevent deflation from becoming entrenched and causing long-lasting damage to the economy.
In the context of the neoclassical model of economics, central bankers are often more concerned with fighting inflation, as this model suggests that monetary policy primarily affects the price level rather than real GDP or unemployment. An effective monetary policy, therefore, should maintain a consistent pattern of low inflation to provide a stable environment for economic growth, rather than to combat unemployment directly.