Consider the Following Statement About Inflation Targeting: a Policy of Inflation

question 75

Multiple Choice

Consider the following statement about inflation targeting: A policy of inflation targeting acts as an automatic stabilizer in the economy,just like the automatic fiscal stabilizers.Choose the most appropriate response to this statement.The statement is

• A)true,because an inflationary gap is met with a contractionary monetary policy.
• B)true,because a recessionary gap is met with an expansionary monetary policy.
• C)not true,because inflation targeting requires active policy decisions by the Bank of Canada,whereas fiscal stabilizers need no policy implementation.
• D)not true,because inflation targeting automatically maintains inflation within the target range,whereas fiscal stabilizers require government policy decisions.
• E)true,because inflation targeting and fiscal stabilizers are essentially the same policy tool.

---

Definitions:

Partnership Agreement

A partnership agreement is a legal document that outlines the rights, responsibilities, and obligations of each partner in a business partnership.

Automatic Termination

A provision within a contract that automatically ends the contract under certain predefined conditions without the need for a notice.

Buyout

A financial transaction where a person or entity acquires the entire stake or a substantial part of a company, often resulting in a change of ownership.

Partnership Debts

Financial obligations for which all partners in a business partnership are jointly responsible.