Suppose Output Is at Its Potential Level and Then There

question 56

Multiple Choice

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

• A)is closely related to changes in core inflation so the Bank of Canada uses these for targeting inflation.
• B)is not crucial for inflation targeting because the Bank of Canada does not include these in its targets for "core" inflation.
• C)would be offset by a decline in the Canadian dollar, making these price increases irrelevant.
• D)makes inflation targeting easier because it makes these problems less relevant.
• E)makes inflation targeting harder because these are closely related to excess demand in the economy.

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Definitions:

Corporate Income

The income generated by companies from their operations, including sales, services, and investments.

Taxed

Subjected to a charge or levy by the government on income, transactions, or property to fund public expenditures.

Sole Proprietorships

Sole proprietorships are businesses owned and operated by a single individual, where there is no legal distinction between the owner and the business entity.

Sole Proprietor

The single person at the head of a sole proprietorship.