Question

If higher inflation is bad, then why might it be advantageous to have a higher inflation target rather than a lower target that is closer to zero?

Short answer

A higher inflation target is less binding than a target nearer to zero.

Step-by-step solution

Concept Introduction

Assuming that inflation stays advanced for a long time, it can prompt something financial analysts to call hyperinflation. This is when assumptions that costs will continue to rise fills more inflation, which diminishes the genuine worth of each dollar in your pocket.

Explanation

Albeit higher inflation is terrible yet at the same time numerous national banks target inflation in the scope of $2-3\%$with the goal that their nation will stay in stable condition. Having said that, envision assuming any national bank focus for $0\%$inflation however on the off chance that it turns out to be negative? Its repercussions will be terrible. Nation will dial back, joblessness will happen and so on They can't make do with such accuracy that$0$methods $0$. The nation is certainly not something seemingly insignificant. Numerous things can happen which can have an effect and which prompt negative inflation (emptying). That is the cause they target a bit more than $0$. Also, in the event that your emptying is the current issue of Japan rather than inflation.

Final Answer

A higher inflation target is less binding than a target nearer to zero.