If We Observe That the Actual Rate of CPI Inflation

question 20

Multiple Choice

If we observe that the actual rate of CPI inflation has increased, we can conclude that the

• A)Bank of Canada has abandoned its inflation target.
• B)Bank of Canada has implemented a contractionary monetary policy.
• C)Government of Canada has reduced the money supply.
• D)Bank of Canada has implemented an expansionary monetary policy.
• E)-- it is not possible to conclude any of the above.

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Definitions:

Appreciate

Appreciate, in economic terms, refers to an increase in the value of an asset or currency.

Exchange Rate

is the value of one currency for the purpose of conversion to another.

Euro

The recognized form of money in the eurozone, utilized by 19 of the 27 countries that are part of the European Union.

Nominal Exchange Rate

The exchange rate at which the currency of one nation can be exchanged for the currency of another nation, without considering inflation adjustments.