The Bank of Canada's Response to Changes in Inflation Is

question 65

Multiple Choice

The Bank of Canada's response to changes in inflation is more complex than identified in the ADI-IA model because

• A) the model does not distinguish between core inflation and total CPI inflation.
• B) we cannot calculate the monetary policy rule.
• C) the self-correcting mechanism is only effective for recessionary gaps.
• D) the self-correcting mechanism is only effective for expansionary gaps.
• E) the Bank of Canada only responds to current inflation