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

question 52

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 monetary policy rule can change over time.
• 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 responds to expected future inflation as well as current inflation.

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