In an Effort to Maintain Inflation at Its Targeted Level

question 44

Multiple Choice

In an effort to maintain inflation at its targeted level the Bank of Canada designs its policies,in the short run,to

• A)eliminate all unemployment.
• B)keep real GDP close to potential output.
• C)minimize the growth of the money supply.
• D)allow the aggregate supply curve to close any output gaps.
• E)eliminate all negative shocks to the economy.

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Definitions:

Expected Utility Hypothesis

A theory suggesting that individuals choose between risky or uncertain prospects by comparing their expected utility values.

Monotonic Increasing Function

A mathematical function that either never decreases or strictly increases, ensuring that as the input increases, the output does not decrease.

Risk

The potential for losing something of value, which can be physical, emotional, financial, or reputational.

Natural Log

A logarithm to the base e, where e is an irrational and transcendental constant approximately equal to 2.71828.