Given Its Existing Policy Regime of "Inflation Targeting", the Bank

question 99

Multiple Choice

Given its existing policy regime of "inflation targeting", the Bank of Canada would likely react to a large negative AD shock by

• A)selling bonds on the open market.
• B)raising the bank rate.
• C)ignoring the shock and allowing the economy to adjust.
• D)increasing its target for the overnight interest rate.
• E)decreasing its target for the overnight interest rate

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Definitions:

Primacy Effect

The tendency to remember information that is presented first or early in a list more effectively than information presented later.

Recency Effect

The psychological phenomenon where the most recently presented information is remembered better than earlier information.

Sequence Order Effect

The phenomenon where the order in which items are presented affects the recall or understanding of those items.

Reconstruction

An account of an event that has been pieced together from a few highlights.