The concept of the "Grease Effect" in macroeconomics and inflation literature implies that:

The "Grease Effect" is associated with the idea that a small positive rate of inflation can facilitate adjustment in the labour market. Nominal wages are often downward rigid. This means that workers may strongly resist an explicit reduction in their money wages. Suppose a worker's nominal wage remains constant at W while the general price level P increases. The real wage is: Real Wage = W/P If P rises while W remains constant: Real Wage ↓ Therefore, moderate inflation allows employers to reduce real labour costs without explicitly reducing workers' nominal wages. For example: Suppose nominal salary = ₹50,000 per month. If prices increase by 4% while nominal salary remains unchanged, the employee's real wage has effectively declined even though the money salary has not been cut. This flexibility can help labour markets adjust during economic downturns and may reduce the need for layoffs. Inflation, in this sense, "greases the wheels" of the labour market. Hence, option (B) is correct.