Consider the Following Statement About Inflation Targeting: a Policy of Inflation

question 89

Multiple Choice

Consider the following statement about inflation targeting: A policy of inflation targeting acts as an automatic stabilizer in the economy, just like the automatic fiscal stabilizers. Choose the most appropriate response to this statement. The statement is

• A)Not true, because inflation targeting requires active policy decisions by the Bank of Canada, whereas fiscal stabilizers need no policy implementation.
• B)True, because a recessionary gap is met with an expansionary monetary policy.
• C)True, because inflation targeting and fiscal stabilizers are essentially the same policy tool.
• D)True, because an inflationary gap is met with a contractionary monetary policy.
• E)Not true, because inflation targeting automatically maintains inflation within the target range, whereas fiscal stabilizers require government policy decisions.

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Definitions:

Tunic

In a biological context, a fibrous or cellular covering layer, such as that surrounding certain seeds or the body of sea squirts and other invertebrates.

Adult Tunicates

Marine invertebrates that are members of the subphylum Tunicata; they are sessile as adults and have a sac-like body covered with a tunic.

Filter Feeders

Organisms that feed by straining suspended matter and food particles from water, typically using a specialized filtering structure.

Lancelets

Lancelets are small, blade-like marine animals belonging to the subphylum Cephalochordata, exhibiting key characteristics of chordates, such as a notochord and a dorsal nerve cord.