One Criticism of the Bank of Canada's Focus on an Inflation

question 83

Multiple Choice

One criticism of the Bank of Canada's focus on an inflation control target is that

• A)if inflation falls below the target range, a recession will result.
• B)if inflation edges above the target range, the Bank decreases aggregate demand and could create a recession.
• C)the Bank pays too much attention to unemployment and real GDP growth and not enough to inflation control.
• D)it makes setting expectations of inflation difficult.
• E)the Bank rarely achieves its target.

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Definitions:

Nominal Gross Domestic Product

The market value of all final goods and services produced within a country in a year, measured using current prices without adjustment for inflation.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy, a measure of inflation or deflation.

Price Index

A statistical measure that examines the weighted average of prices of a basket of consumer goods and services, showing trends over time.

Base Year

A specific year against which economic, financial, or statistical data is standardized or indexed, allowing for comparison over time.