Which of the following benefits flow from the application of an inflation-control target?
A)If actual inflation exceeds the target range, the Bank of Canada can induce a recession to correct the matter.
B)The monetary authorities can change the target range whenever they feel it is appropriate.
C)People can make decisions with an understanding that inflation rates will remain relatively low.
D)Financial market traders have a clearer understanding of the Bank of Canada's intentions.
E)Both C and D

Question

Quizplus · Accepted Answer

Both options C and D are true. Inflation-control targets provide a clear indication to people about the long-term inflation rate, which helps them to make better decisions. The target range also provides clarity to financial market traders about the Bank of Canada's future policy intentions. Option A is incorrect as inducing a recession is not the preferred method of controlling inflation. Option B is incorrect as the monetary authorities cannot change the target range whenever they feel like it, it requires careful consideration and analysis.

Which of the Following Benefits Flow from the Application of an Inflation-Control