The Bank of Canada announced in its June 2021 Monetary Policy Report that it was keeping the target for the overnight rate at its V4% floor. In the current context, what do you think of this decision? A) The economy is running at its potential. B) The economy is running above its potential. C) The economy is spinning below its potential

The Bank of Canada announced in its June 2021 Monetary Policy Report that it was keeping the target for the overnight rate at its V4% floor. In the current context, what do you think of this decision? A) The economy is running at its potential. B) The economy is running above its potential. C) The economy is spinning below its potential

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter13: Monetary Policy: Conventional And Unconventional

Section: Chapter Questions

Problem 7DQ

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On June 5, 2003, the European Central Bank acted to decrease the short-term interest rate in Europe by half a percentage point, to 2 percent. The bank’s president at the time, Willem Duisenberg, suggested that, in the future, the bank could reduce rates further. The rate cut was made because European countries were growing very slowly or were in recession. What effect did the bank hope the action would have on the economy? Be specific. What was the hoped-for result on C, I, and Y?
On June 5, 2003, the European Central Bank acted to decreasethe short-term interest rate in Europe by half a percentagepoint, to 2 percent. The bank’s president at the time, WillemDuisenberg, suggested that, in the future, the bank could reducerates further. The rate cut was made because European coun-tries were growing very slowly or were in recession. What effectdid the bank hope the action would have on the economy? Bespecific. What was the hoped-for result on C, I, and Y?
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