system
Given the following post, respond as if you're commenting on Reddit:
human
Why does the government target 2% inflation rate instead of 0% inflation?

Googling this question, I think the common answer is that the government inflates the currency in order to entice us to spend money now, knowing that our cash will be worth less in the future. This apparently is good for the economy. Another answer is that deflation is bad because we will stop spending now if we know prices will drop in the future, and this is also apparently bad for the economy.

I'm not sure I follow. If I need to buy a $25K car, how is the threat of the currency inflating by 2% going to entice me to buy that car any more than my current desire to buy a car? 

How will a 0% inflation target lead to deflation? Can't the fed just inflate the currency once this starts? Why would a 2% target not lead to deflation but while a 0% target would?

What other reasons are there for a 2% inflation target? Are there economists who believe a 0% inflation target is better? Do the majority of economists support the >0% inflation target?
gpt
Theoretically, Friedman argued that the optimum rate of inflation is actually negative. The logic of this is quite simple, though it obviously has a mathematical proof. The act of spending cash clearly has welfare benefits, so the goal of monetary policy should be to maximise those benefits, i.e. reduce the cost of cash. The cost of holding cash is very simply the nominal interest rate, which represents the risk-free return rate. But the real interest rate is determined by things like technology and culture, and is positive in the long run. If real interest rates are positive, and nominal interest rates are zero, then the optimal inflation rate must be negative. (Real interest rate = nominal interest rate - inflation rate)

Since then there have been a number of counter suggestions. One of the leading ones is the grease effect suggested by Tobin. Wages are very sticky downwards, if your boss cut your salary despite you having done nothing wrong, you would probably panic. However firms face business disruptions in both directions, so if a firm is underperforming in one year, it has no way to reduce costs short of firing people, which is bad for the firm, the employee, and the entire economy. Consequently, having some inflation gives all firms some flexibility, which creates some level of efficiency.

Another one relates to the zero lower bound. It is not possible to reduce nominal interest rates significantly below zero (yet), so in times of downturn, if your nominal interest rates are already at zero, then cutting them further would be impossible. This would have the effect of making the economy swing back and forth rather than allowing central banks to guide the economy on a stable path. Consequently, keeping inflation higher allows nominal interest rates to be higher, and gives more breathing room to central banks to tweak rates.

In fact, Ball argues that the inflation rate itself is completely inconsequential. As long as the volatility of the inflation rate is minimised, then individuals and firms have a pretty good idea of what prices are going to be like at any future point in time and can make all their investment or purchasing decisions based on that. Consequently, it might be more optimal to just have a reasonably high inflation rate that never changes in any year.