If the Bank of Canada's Monetary Policy Rule Is R

question 106

Multiple Choice

If the Bank of Canada's monetary policy rule is r = 0.02 +
,the aggregate demand function for the economy is ADI = 5,000 + 0.8Y - 20,000r,current inflation equals 5% (0.05) ,and potential output (Y*) equals 20,000,then short-run equilibrium output equals __________,and inflation will eventually equal ________% when the economy returns to potential.

• A) 17,000;3
• B) 17,000;5
• C) 18,000;5
• D) 18,000;3
• E) 19,000;4

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Definitions:

Trichromatic Theory

A theory of color vision based on the existence of three types of cones in the retina that are most sensitive to blue, green, or red light.

Nobel Prize

A set of international awards given annually in several categories such as Physics, Chemistry, Medicine, Literature, and Peace, to individuals or organizations who have made significant contributions to humanity.

Wavelength

The distance between successive crests of a wave, especially points in a sound wave or electromagnetic wave, which is related to the wave's frequency and energy.

Hue

A dimension of color that is determined by the wavelength of light; the term is often used to refer to the name of the color such as red, blue, or yellow.