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There Can Be Strong Pressure on the Bank of Canada

Question 82

Multiple Choice

There can be strong pressure on the Bank of Canada to validate a large negative supply shock. The motive behind this pressure is


A) that there is the danger of initiating a wage- price spiral.
B) that wages often fall only very slowly, so the adjustment back to full employment can take a very long time.
C) to reduce unemployment below the NAIRU.
D) to keep a "healthy" amount of inflation in the economy.
E) that the Bank of Canada must be seen to be pursuing a restrictive monetary policy, in order to stop any expectational inflation.

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