Suppose the Bank of Canada Has a Target Inflation Rate

question 67

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%.If Amazon has adaptive expectations,it will set its price for the Kindle in 2013 at

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

---

Definitions:

Task-Related

Pertains to or involves the actions or activities directly associated with completing a specific job or assignment.

Hypothetical Questions

Questions based on possible situations or scenarios rather than actual events, often used to explore reactions or decisions.

Justifying Questions

A method of inquiry that seeks to understand the reasons or rationale behind decisions, actions, or beliefs.

Silent Member

An individual in a group who contributes minimally or not at all during discussions or activities, often due to shyness, lack of knowledge, or disinterest.