If the Bank of Canada Has Discretion to Choose Its

question 76

Multiple Choice

If the Bank of Canada has discretion to choose its own policy and announces a policy of low inflation, then:

• A)the policymaker is required to make the money supply grow at a low rate.
• B)private economic agents are sure to believe the announcement because it is credible.
• C)private economic actors are likely to discount the policy because the Bank of Canada has an incentive to renege on its policy once expectations are formed.
• D)the Bank of Canada is certain to renege on its policy once expectations are formed because then it can lower unemployment with minimum inflation.

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Definitions:

Social Facilitation

The tendency for people to perform differently, often better, when in the presence of others than when alone.

Social Loafing

The occurrence in which people put forth less effort towards attaining a goal while working as part of a group than they do when working individually.

Deindividuation

This psychological phenomenon occurs when individuals immersed in a group lose their sense of individual identity, often resulting in a detachment from personal responsibility and an increase in impulsive behaviors.

Colliding Cultures

The clash that occurs when different cultural values, beliefs, practices, or attitudes interact, often leading to conflict or misunderstanding.