Question

The main cost that low inflation imposes on an economy is that low inflation

a. distorts some economic decisions.

b. reduces real wages.

c. inevitably leads to high inflation.

d. benefits lenders at the expense of borrowers.

Answer 1

"A"

Low inflation will distort some economic decisions, as long as there is any inflation the borrowers will benefit with low inflation they benefit less, low inflation will increase the real wages.