In the 1970s People Had Become Accustomed to High Inflation

question 38

Essay

In the 1970s people had become accustomed to high inflation. In 1979, the Bank of Canada decided to fight inflation and decreased the money supply growth rates. Many people thought that the Bank of Canada's action would cause a recession. Is this thinking consistent with the aggregate demand and aggregate supply model? Explain. According to monetary misperceptions theory, what should have happened to output if the inflation rate fell relative to what people expected? Explain.

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Definitions:

Legal Immigrants

Individuals who have been granted the right to live permanently and legally within a country that is not their country of birth.

Social Policies

Guidelines, principles, legislation, and activities that affect the living conditions conducive to human welfare, often concerning issues like health, housing, and education.

Supplemental Nutrition

A program or initiative designed to provide additional nutritional support to individuals or groups who may not have adequate access to food for a healthy life.

Public Housing

Residential buildings owned and operated by a government authority, intended to provide affordable housing to low- and moderate-income families.