Final answer:
While the answer options provided do not directly state the benefits of mild inflation, it is understood that such inflation can reduce deflationary pressure, increase consumer spending, and support economic growth. Mild inflation can be preferable to deflation, which can have negative impacts on the economy.
Step-by-step explanation:
According to some economists, the positive effects of mild inflation include scenarios where the economy experiences gradual price increases that can actually lead to benefits such as encouraging spending and investment, reducing the real burden of debt, and avoiding the pitfalls of deflation.
Among the options provided, the correct answer is none; however, the spirit of the question suggests that the student is seeking benefits that correspond with an increased aggregate demand (AD), potentially leading to economic growth.
A moderate inflation rate can prevent deflationary pressure and stimulate the economy by encouraging consumers to buy now rather than later and businesses to invest.
Deflationary pressure is lessened with mild inflation, which can actually increase consumer spending as people are incentivized to purchase before prices go up, and it can spur economic growth as businesses are more likely to invest and hire.
A tax increase on consumer income could reduce consumption, potentially countering inflation by pushing the AD curve left, which is a contrasting mechanism.