Question

The Bank of Canada and the government of Canada have agreed that the Bank will achieve...

The Bank of Canada and the government of Canada have agreed that the Bank will achieve an inflation rate target. Explain the conflict between inflation targeting and unemployment targeting in the short run. When the Bank pursues an inflation rate target and the current inflation rate is above the target​ rate, the unemployment rate​ ______ and the price level​ ______ in the short run.

A. ​increases; increases
B. ​increases; decreases
C. ​decreases; increases
D. ​decreases; decreases

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Option C.

  • The inflation rate refers to the rate of Increase in the general price level of goods and services in the economy.
  • When the bank pursuse an inflation rate target and the current inflation rate is above the target rate, the unemployment rate decreases and the price level increases in the short run.
  • We know that in short run, there is a negative relationship between the unemployment rate and the inflation rate but the price level and the inflation rate are directly related to each other.
  • When the inflation rate is above the target level, it means that the prices have increased and there is a demand pull inflation in which the demand exceeds the supply.
  • To create more supply Inorder to satisfy the demands, the firms are willing to employ more labour in short run which decreases the unemployment rate.
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose the Bank of Canada unexpectedly raises the inflation target from 2% to 5%. Using the...
Suppose the Bank of Canada unexpectedly raises the inflation target from 2% to 5%. Using the Phillips Curve diagram, explain how this would affect the unemployment rate, in the short run and in the long run. NO HANDWRITINGS PLEASE. I CAN'T READ MOST OF THE HANDWRITINGS, UNFORTUNATELY. THANKS IN ADVANCE FOR TYPING ANSWERS
When the Bank of Canada wants to induce a monetary expansion, a. it can provide commercial...
When the Bank of Canada wants to induce a monetary expansion, a. it can provide commercial banks with excess reserves and has considerable influence over how many new loans banks will make to the public.   b. it can provide commercial banks with excess reserves but how many new loans will be made by the commercial banks is uncertain.   c. it cannot generally provide commercial banks with excess reserves and how many new loans will be made by the commercial banks...
a) In an open-market purchase, the Reserve Bank ____ government bonds and the supply of bank...
a) In an open-market purchase, the Reserve Bank ____ government bonds and the supply of bank reserves ______. A. buys; increases B. buys; decreases C. buys; does not change D. sells; increases b) If inflation does not adjust rapidly in the short run, then when the Reserve Bank increases the nominal interest rate, in the short run the real interest rate will: A. increase B. decrease C. not change D. equal the nominal interest rate c) If planned aggregate spending...
In March 2013 the Fed announced that it might decrease its open market purchases of securities...
In March 2013 the Fed announced that it might decrease its open market purchases of securities by the end of the year. This announcement suggests that the Fed is concerned that a. the unemployment rate will increase. b. the inflation rate will rise. c. the federal funds interest rate will fall too low for the Fed to control it. d. the federal funds interest rate will rise too high for the Fed to control it. In the aggregate supply-aggregate demand...
when the bank of canada is concrened with inflation, it buys government securities. is the statement...
when the bank of canada is concrened with inflation, it buys government securities. is the statement correct or not. explain
The aggregate demand curve shows the relationship between the aggregate price level and: A) aggregate productivity....
The aggregate demand curve shows the relationship between the aggregate price level and: A) aggregate productivity. B) the aggregate unemployment rate. C) the aggregate quantity of output demanded by households, businesses, the government, and the rest of the world. D) the aggregate quantity of output demanded by businesses only. 2.When the aggregate price level increases, the purchasing power of many assets falls, causing a decrease in consumer spending. This is known as the _____ effect and is a reason why...
What actions have, or can the Chinese government and China’s central bank take in response to...
What actions have, or can the Chinese government and China’s central bank take in response to the US trade tariffs? In your answer identify two actions (one for the Government and one for the Central Bank). Explain these actions and their intended impact on China’s RGDP, unemployment and the price level. For AS factors indicate whether they are long-run or short-run AS factors or both. Draw a AD-AS diagram to illustrate your answer.
1. The Federal Reserve Act says that the Fed must try to achieve​ ______. A. a...
1. The Federal Reserve Act says that the Fed must try to achieve​ ______. A. a balanced budget B. maximum​ employment, stable​ prices, and moderate​ long-term interest rates C. a stable U.S. dollar on foreign exchange markets and moderate​ long-term and​ short-term interest rates D. an economic environment in which investment in U.S. stock and money markets is encouraged The Federal Reserve Act says that the Fed must use​ ______ to achieve its objectives. A. bank reserves B. commercial banks...
When the Bank of Canada buys government bonds, how do the reserves of the banking system...
When the Bank of Canada buys government bonds, how do the reserves of the banking system change and what happens to the money supply? a. The reserves increase, so the money supply decreases. b. The reserves decrease, so the money supply decreases. c. The reserves increase, so the money supply increases. d. The reserves decrease, so the money supply increases.
he ultimate objective of the Bank of Canada is to target an inflation rate between 1...
he ultimate objective of the Bank of Canada is to target an inflation rate between 1 and 3 percent, aiming for the middle of the band that is 2 percent. Suppose that inflation is expected to go above 2 percent, the central bank will react by changing the target for the overnight rate. Will the Bank increase or decrease the target for overnight interest rate? Changes in the interest rate affect various kinds of economic activity and thereby, over time,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT