Suppose the Bank of Canada Is Criticized for Implementing a Contractionary

question 95

Multiple Choice

Suppose the Bank of Canada is criticized for implementing a contractionary monetary policy at a time when the inflation rate is at or near its target level.One explanation for this policy decision is likely that

• A)the Bank regularly maintains a contractionary policy stance in order to keep inflation at or near its target.
• B)it is extremely difficult to predict future events and a contractionary policy is the safest policy choice.
• C)the Bank anticipates a decrease in Canadian net exports and is acting now because of the unavoidable time lags.
• D)the Bank anticipates a decrease in investment spending and is acting now because of the unavoidable time lags.
• E)the Bank anticipates a rise in inflation and is acting now because of the unavoidable time lags.

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Definitions:

Familiar

Well known from long or close association, giving a sense of comfort or recognition.

Systematic Desensitization

A therapeutic technique used to treat phobias and anxiety disorders by gradually exposing the patient to the feared object or situation in a controlled manner.

Relax

To become less tense or anxious, or to make something less taut or firm, often in the context of stress relief or leisure activities.

Imagine

The ability to form new images and sensations in the mind that are not perceived through the five senses.