As a Result of the Overnight Target Rate Set at the Effective

question 140

Multiple Choice

As a result of the overnight target rate set at the effective lower bound during the 2008-2009 Canadian recession,the ADI-IA model was

• A) no longer self-correcting as interest rates could not be reduced when inflation rates fell.
• B) no longer self-correcting as fiscal policy could not eliminate the recessionary gap.
• C) no longer self-correcting as inflation rates could not change.
• D) extremely effective as lower inflation rates reduced interest rates even further.
• E) extremely effective as lower inflation rates reduced real interest rates to negative values.

---

Definitions:

Perceptual Constancy

Perceptual constancy refers to the psychological phenomenon whereby people perceive objects as maintaining stable properties (size, brightness, color) despite changes in perspective, distance, or lighting.

Monocular Cues

Visual information that allows for the perception of depth and three-dimensional space using one eye.

Binocular Cues

Depth cues, such as retinal disparity, that depend on the use of two eyes.

Retinal Disparity

A binocular cue for perceiving depth based on the differences between the visual images that each eye perceives.