8. Suppose the Bank of Canada is criticized for implementing a contractionary monetary policy at a time when the inflation rate is at or near its target level. One explanation for this policy decision is likely that the Bank anticipates a rise in inflation and is acting now because of the unavoidable time lags. it is extremely difficult to predict future events and a contractionary policy is the safest policy choice. the Bank anticipates a decrease in investment spending and is acting now because of the unavoidable time lags. the Bank anticipates a decrease in Canadian net exports and is acting now because of the unavoidable time lags. the Bank regularly maintains a contractionary policy stance in order to keep inflation at or near its target.

Time lags makes policy decisions more difficult. It is observed interest rate changes take much time…

Answered: Suppose the Bank of Canada is…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: The Short-run Trade-off Between Inflation And Unemployment

Section: Chapter Questions

Problem 7PA

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8. Suppose the Bank of Canada is criticized for implementing a contractionary monetary policy at a time when the inflation rate is at or near its target level. One explanation for this policy decision is likely that

		the Bank anticipates a rise in inflation and is acting now because of the unavoidable time lags.
		it is extremely difficult to predict future events and a contractionary policy is the safest policy choice.
		the Bank anticipates a decrease in investment spending and is acting now because of the unavoidable time lags.
		the Bank anticipates a decrease in Canadian net exports and is acting now because of the unavoidable time lags.
		the Bank regularly maintains a contractionary policy stance in order to keep inflation at or near its target.

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