Suppose Output Is at Its Potential Level and Then There

question 1

Multiple Choice

Suppose output is at its potential level and then there is a sudden increase in food and energy prices.This increase

• A)makes inflation targeting easier because it makes these problems less relevant.
• B)makes inflation targeting harder because these are closely related to excess demand in the economy.
• C)would be unlikely to lead to an immediate policy response because it would not appear in "core" inflation.
• D)would be offset by a decline in the Canadian dollar,making these price increases irrelevant.
• E)would lead to an immediate policy response to prevent the opening of an inflationary gap.

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Definitions:

State Income Tax

Taxes levied by individual states on the income earned by residents and, sometimes, non-residents within the state.

Pay Periods

Specific intervals or durations of time for which employees receive their wages or salaries.

Hourly Workers

Employees who are paid for each hour worked, as opposed to salaried workers who receive a set amount regardless of hours worked.

Salary Workers

Employees who are paid a fixed amount of money or remuneration on a regular basis, typically monthly or annually, not hourly.