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It was stated that the bank of Canada's long run policy target is the rate of inflation.
 
A) what experiences have led many central banks to choose this long-run policy target?
B) the bank of Canada closely monitors the level of real gdp and the output gap in the short run. How does it use this information in pursuit of its long run policy of targeting the rate of inflation at 2 percent?

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Kritika Krishnakumar
Kritika KrishnakumarLv10
28 Sep 2019

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Related questions

1. Which of the following is likely to happen if the Fed buys Treasury securities from banks?

  interest rate rises; investment falls
  interest rate rises; investment rises
  interest rate falls; investment rises
  interest rate falls; investment falls

2. The main goal of monetary policy is to shift

  AD.
  SRAS.
  LRAS.
  both AD and SRAS.
  both AD and LRAS.

3. Which of the following is true regarding the effects of an expansionary monetary policy?

  Printing more money will affect real GDP only in the short run because all prices do not adjust fully in the short run.
  Printing more money will affect real GDP both in the short and long run because inflation is a natural occurrence of expansionary monetary policy.
  Printing more money will not lower the value of money in the short run because prices are fully flexible in the short run.
  Printing more money will ultimately raise the value of money in the long run because prices are fully flexible in the long run.

4. In which of the following cases are you likely to be adversely affected by unexpected inflation?

  You, the owner of a local restaurant, charge the price of lamb lasagna as per the daily market rate of lamb.
  You purchase Mountain Dew every day from the dormitory vending machine, which keeps its prices fixed for the entire school year.
  You, the owner of an airline company, sign a two-year contract for airline fuel.
  You deposit $10,000 in a bank account for 5 years for a fixed interest rate of 1%.

5. The Phillips curve depicts the relation between

  real GDP and price level.
  price level and inflation rate.
  unemployment rate and inflation rate.
  unemployment rate and real GDP.

6. Which of the following statements is true regarding the shapes of short-run and long-run Phillips curves?

  The short-run Phillips curve is vertical and the long-run Phillips curve is downward sloping.
  The short-run Phillips curve is downward sloping and the long-run Phillips curve is vertical.
  Both the short-run and long-run Phillips curves are downward sloping.
  Both the short-run and long-run Phillips curves are vertical.

7. Suppose the table below lists the actual annual inflation rates for 2010 to 2015. What would be the most likely predictions people make about the inflation rate for 2016 based on adaptive and rational expectations theories, respectively?

Year Actual Inflation rate
2010 0%
2011 0%
2012 3%
2013 3%
2014 6%
2015 6%
   
  6% and 3%
  6% and 9%
  6% and 12%
  9% and 6%
  3% and 6%

8. Which of the following can change relatively quickly in the short-run?

  the price of a latte in a coffee shop
  the salary of a finance professor
  the rent paid for a store

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.

1. If the price level doubles and the real output doesn't change, then nominal output also doubles.
2. Inflation makes it less difficult to interpret the information conveyed by prices.

3. Laissez-faire economists oppose government intervention in the market process.

4. Active demand management policies are based on the work of JohnMaynard Keynes.

5. In the AS/AD model, as the price level rises, the real value of assets increases, causing consumption to increase. This is one reason why the aggregate demand curve slopes down.

6. The short-run aggregate supply curve is upward sloping in part because increases in aggregate demand cause some firms to increase their price markups.

7. If productivity and wages both raises by 3 percent, then the short-run aggregate supply curve does not shift.

8. The long-run aggregate supply curve is vertical because all prices adjust in the long run.

9. If the economy is not in long-run equilibrium and other things are equal, then prices will eventually adjust to bring the economy to long-run equilibrium.

10. Most economists agree that it is possible for fiscal policy to fine-tune the economy.

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