The decision by the Bank of Canada and many other central banks to target the rate of inflation partly reflects the evidence of the

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Quizplus · Accepted Answer

The decision to target the rate of inflation by central banks, including the Bank of Canada, is based on the principle of the long-run neutrality of money. This economic theory suggests that changes in the money supply only affect nominal variables in the long run, such as prices, and have no effect on real variables, such as output or employment. Therefore, by targeting inflation, central banks aim to stabilize the economy without affecting its real growth in the long run.

The Decision by the Bank of Canada and Many Other