Which of the following is considered a benefit of inflation? ...

[renzo156]

Which of the following is considered a benefit of inflation?
 
  A) the option of a negative real interest rate
  B) money illusion
  C) seignorage
  D) all of the above
  E) none of the above

Question 2

Discuss the current debate on the optimal inflation target.
 
  What will be an ideal response?

[cadimas]

Answer to Question 1

D

Answer to Question 2

At this stage, most central banks in richer countries have an inflation target of about 2. They are being challenged on two fronts. Some economists want to achieve price stability  that is, 0 inflation. Others want, instead, a higher target rate of inflation, say 4, to help prevent from falling in the liquidity trap in the future.