One reason that the Fed does not reduce inflation all the way to zero is that A)

ID: 1238964 • Letter: O

Question

One reason that the Fed does not reduce inflation all the way to zero is that
A) the Fed does not know how to reduce the inflation rate below one or two percent per year.
B) the benefits of reducing inflation all the way to zero are too low to justify the costs to society.
C) Federal law forbids the Fed from reducing the inflation rate to zero.
D) the Fed fears a "rebound" effect, in which the inflation rate would bounce back up to even higher levels than before the reduction.
E) the official inflation rate underestimates the true inflation rate, so if the Fed reduced the true rate to zero, the official rate would be negative.

Explanation / Answer

Confirmed Answer is B

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One reason that the Fed does not reduce inflation all the way to zero is that A)

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