The objective of the Bank of Canada's monetary policy is
A)to keep the unemployment rate below 5 percent, the inflation rate between 1 and 3 percent a year, and long-term real GDP growth above 4 percent a year.
B)to control the quantity of money and interest rates to avoid inflation and when possible prevent excessive swings in real GDP growth and unemployment.
C)to keep the unemployment rate below 5 percent, the inflation rate between 1 and 3 percent a year, and long-term interest rates below 4 percent a year.
D)to keep the labour force participation rate above 80 percent, the inflation rate below 2 percent a year, and the exchange rate fluctuating by less than 3 percent a year.
E)to keep the overnight loans rate below 2 percent a year and the unemployment rate at its natural rate.

Question

Quizplus · Accepted Answer

The Bank of Canada's monetary policy aims to control the quantity of money and interest rates in order to avoid inflation and prevent excessive swings in real GDP growth and unemployment. The specific targets of the policy include keeping inflation within a target range of 1-3%, but there is no specific target for long-term real GDP growth or interest rates, as stated in options A and C. Option D refers to targets that are not included in the Bank of Canada's mandate, and option E only mentions specific targets for interest rates and unemployment, ignoring the broader goals of controlling inflation and stabilizing the economy.

The Objective of the Bank of Canada's Monetary Policy Is