Consider a Central Bank That Chooses to Implement Its Monetary

question 73

Multiple Choice

Consider a central bank that chooses to implement its monetary policy by expanding the money supply by a fixed percentage amount in every year.One important disadvantage with this approach to monetary policy is that it may

• A)lead to sustained inflation.
• B)be destabilizing if the demand for money is unstable.
• C)lead to stable growth of national income.
• D)be inconsistent with the Bank of Canada Act.
• E)create a recessionary output gap.

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Definitions:

Correlation Coefficients

Statistical measures that quantify the direction and strength of the relationship between two numerical variables.

Continuous Variables

Variables that can take on an infinite number of values within a given range, representing quantities that can be divided into finer units.

Correlations

Statistical measures that describe the degree to which two variables move in relation to each other.

Causes

Factors or events that bring about an effect or a change, typically studied in various disciplines to understand phenomena or solve problems.