The central bank of the country Oakville is hosting its annual economic policy symposium with monetary policy as the theme. Several bankers and professional economists are in attendance. Dorah Baker, a professor at the University of Oakville, is of the opinion that monetary policy should target the rate of growth of the money supply. This, she claims, would increase economic stability. Jack Snyder, a delegate attending the conference, does not agree. He thinks that monetary policy is highly effective in controlling inflation and so the central bank should continue to follow inflation-targeting. In fact, Jack also believes that the central bank should bring inflation down from the current level of four percent to as close to zero as possible.
Which of the following, if true, would suggest that monetary policy may not be very effective in substantially reducing inflation from the current level of four percent?
A. Oakville's central bank has maintained the interest rate at 0.25 percent for the last two years.
B. The highest level of inflation that Oakville has ever experienced is 5.5 percent.
C. Although the current level of inflation is considered to be high, the economy has also been growing at an impressive pace.
D. The marginal propensity to save in Oakville has traditionally been low.
E. Inflation in recent years has been driven by rising costs of production.
The central bank of the country Oakville is hosting its annual economic policy symposium with monetary policy as the theme. Several bankers and professional economists are in attendance. Dorah Baker, a professor at the University of Oakville, is of the opinion that monetary policy should target the rate of growth of the money supply. This, she claims, would increase economic stability. Jack Snyder, a delegate attending the conference, does not agree. He thinks that monetary policy is highly effective in controlling inflation and so the central bank should continue to follow inflation-targeting. In fact, Jack also believes that the central bank should bring inflation down from the current level of four percent to as close to zero as possible.
Which of the following, if true, would suggest that monetary policy may not be very effective in substantially reducing inflation from the current level of four percent?
A. Oakville's central bank has maintained the interest rate at 0.25 percent for the last two years.
B. The highest level of inflation that Oakville has ever experienced is 5.5 percent.
C. Although the current level of inflation is considered to be high, the economy has also been growing at an impressive pace.
D. The marginal propensity to save in Oakville has traditionally been low.
E. Inflation in recent years has been driven by rising costs of production.
