Assume That the Bank of Canada Has a Target Inflation

question 44

Multiple Choice

Assume that the Bank of Canada has a target inflation rate of 2% and that the values for how much the nominal target overnight rate responds to a deviation of inflation from its target,g,and how much the nominal target overnight rate responds to real GDP,h,are both 0.5.According to the Taylor rule,if inflation decreases by 2%,the real interest rate will decrease by

• A) 1%.
• B) 2%.
• C) 3%.
• D) 4%.

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Definitions:

Artery Wall

The layered structure of an artery, composed of an inner endothelium, a middle muscular layer, and an outer connective tissue.

Vasa Vasorum

Small vessels distributed to the outer and middle coats of larger blood vessels.

Arteries

Blood vessels that carry blood away from the heart to various parts of the body.

Veins

Blood vessels that carry blood towards the heart, typically carrying deoxygenated blood from the tissues back to the heart, except for pulmonary and umbilical veins.