What is the main problem with mild inﬂation, according to some economists?
A) It reduces the size of the GDP gap.
B) It leads to unanticipated deﬂation.
C) It increases frictional and structural unemployment in the economy.
D) It diverts productive time toward activities to hedge against inﬂation.

Question

Quizplus · Accepted Answer

Some economists argue that mild inflation causes people to spend more time and effort on activities to hedge against inflation, such as investing in stocks or commodities, rather than more productive activities. This diversion of resources can lead to a decrease in overall productivity and economic growth in the long run.

What Is the Main Problem with Mild Inﬂation, According to Some