What Is One Problem with Focusing on the CPI as the Measure

question 84

Multiple Choice

What is one problem with focusing on the CPI as the measure of inflation when conducting monetary policy?

• A)Many elements in the CPI change for reasons unrelated to the state of the Canadian economy.
• B)It is closely related to the value of M2.
• C)Changes in monetary policy have little effect on the CPI,especially in the long run.
• D)The CPI is too stable to accurately reflect the changes occurring in the Canadian economy.
• E)The CPI distorts the value of commercial bank reserves.

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