a. It is often suggested that the Bank of Canada try to reduce the inflation rate to zero. If we assume that velocity is constant, does this zero-inflation goal require that the rate of money growth equal zero? If yes, explain why. If no, explain what the rate of money growth should equal.
b. Explain whether the following statements are true, false, or uncertain.
(i) "Inflation hurts borrowers and helps lenders, because borrowers must pay a higher rate of interest.
(ii) "If prices change in a way that leaves the overall price level unchanged, then no one is made better or worse off."
(iii) "Inflation does not reduce the purchasing power of most workers."
c. If there was a decline in price over time (deflation), why would this be a concern to workers, consumers, and retailers?