Question

Economists generally argue that:

A. costs of moderate inflation are nearly zero whereas high inflation is quite costly.
B. high inflation is costly, but costs of moderate inflation are not nearly as large as the public believes.
C. costs of both high and moderate inflation are quite large.
D. neither high inflation nor moderate inflation is very costly.

Answer 1

Answer: A. costs of moderate inflation are nearly zero whereas high inflation is quite costly.

Step-by-step explanation:

Economists generally believe that moderate inflation is actually good for the economy as prices need to increase in a healthy manner overtime in order to drive consumption. This means that to them, the cost of moderate inflation is nearly zero.

This is a sharp contrast to high inflation which most economists generally believe to be costly as it reduces the savings of people as well as their real wages and welfare.