Suppose the Bank of Canada Has a Target Inflation Rate

question 54

Multiple Choice

Suppose the Bank of Canada has a target inflation rate of 3%,always hits its target,and the inflation rate has been 3% for several years.Furthermore,assume Amazon sets the price of its Kindle Fire at $140 in 2012 and wants to keep the real price of the Kindle constant in order to maximize profits.Now suppose that the Bank of Canada announces on January 1,2013 that it will decrease its target rate for inflation to 1%.The profit-maximizing price for the Kindle in 2013 will be

• A) $137.20.
• B) $140.00.
• C) $141.40.
• D) $144.20.

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Definitions:

Dred Scott v. Sandford

A landmark Supreme Court case in 1857 which held that African Americans, whether enslaved or free, could not be American citizens and therefore had no standing to sue in federal court.

Supreme Court Decision

A ruling made by the Supreme Court, the highest judicial body in a country, often setting a legal precedent.

Fourteenth Amendment

was adopted in 1868 as one of the Reconstruction Amendments, granting citizenship and equal civil and legal rights to African Americans and slaves who had been emancipated.

United States Citizenship

The status of being a recognized member of the United States, entitled to rights and subject to obligations under the Constitution and laws.