The Bank of Canada has formally adopted an inflation target of 2%.One important reason for this is
A) the supply-shock inflation will never exceed this amount.
B) to avoid the temptation of validating positive economic shocks that could lead to accelerating inflation.
C) that output-gap inflation will never exceed this amount.
D) to allow for a permanent inflationary gap which is beneficial to the economy.
E) that economists have determined that only an inflation rate of 2% is consistent with NAIRU.
Correct Answer:
Verified
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