Question

1.

The Canadian policy of taxing old, but not new, oil wells in Alberta in the 1970s,
I: was an ingenious way to tax oil rigs that were already located within Canada without discouraging exploration for new oil reserves;
II: was ill-conceived since it ignored the time-inconsistency problem.

	Both I and II are true.
	II is true; I is not.
	I is true; II is not.
	Neither I nor II is true.

2.

The Bank of Canada's policy of inflation targeting represents
I: an additional automatic stabilizer when the economy is hit with demand shocks;
II: an additional automatic stabilizer when the economy is hit with supply shocks.

	I is true; II is not.
	Both I and II are true.
	II is true; I is not.
	Neither I nor II is true.

Answer 1

Answer 1)  I is true; II is not.

Explanation- In order to encourage the entry of new oil companies in Canada and also promote oil exploration across the Alberta region the Canadian government established a policy of taxation in which old oil wells but not new in 1970s in Alberta region.

Answer 2) I is true; II is not.

Explanation - A sudden event that decreases or increases the demand of services or goods temporarily is known as demand shock. The demand shocks affect the interest rate and hence in order to control them when demand shock hits  inflation-targeting framework acts as an automatic stabilizer for Canadian economy.