If the Bank of Canada focuses on price stability,the aggregate demand curve will be relatively ________,which shows that aggregate expenditure is ________ to changes in the inflation rate.
A) flat; very sensitive
B) flat; very insensitive
C) steep; very sensitive
D) steep; very insensitive

Question

Quizplus · Accepted Answer

When the Bank of Canada focuses on price stability, it implies that they are likely to adjust monetary policy to stabilize prices, making aggregate expenditure very sensitive to changes in the inflation rate, resulting in a relatively flat aggregate demand curve.

If the Bank of Canada Focuses on Price Stability,the Aggregate