Economists at the Bank of Canada Estimate That Time Lags

question 11

Multiple Choice

Economists at the Bank of Canada estimate that time lags in monetary policy imply that

• A)monetary policy is totally ineffective in changing overnight lending rates in the short run.
• B)monetary policy is totally ineffective in changing core inflation rates in the long run.
• C)monetary policy can cause changes in real GDP to occur in 9-12 months and changes in core inflation to occur in 18-24 months.
• D)monetary policy can cause changes in core inflation to occur in 9-12 months and changes in the exchange rate to occur in 18-24 months.
• E)monetary policy can cause changes in core inflation to occur in 9 to 12 months and changes in real GDP to occur in 18-24 months.

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Definitions:

Gross Domestic Product Per Capita

A measure of a country's economic output that accounts for its number of people, reflecting the average income of a country's citizens.

Capital

A resource that can serve to generate wealth, such as factories, equipment, investment accounts, software, land, and education.

Gross Domestic Product Per Capita

A measure of a country's economic output that accounts for its number of people, essentially the average economic output per person.

Net National Income Per Capita

A measure that represents the total income of a nation divided by its population, indicating the average income per person.