Which of the Following Is NOT a Difference Between the Bank

question 110

Multiple Choice

Which of the following is NOT a difference between the Bank of Canada's explanation of how monetary policy works and the Keynesian cross explanation?

• A) The Keynesian cross explanation assumes that interest rate actions of the Bank have no effect on the exchange rate or on net exports.
• B) The Keynesian cross explanation does not make it explicit that there are time lags between changes in the interest rate by the Bank and their ultimate effects on the economy.
• C) The Keynesian cross explanation assumes that prices are fixed.
• D) The Keynesian cross explanation assumes that the inflation rate is zero.
• E) The Keynesian cross explanation does not allow interest rates to affect consumption or investment.

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