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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