Which of the following characterizes the Bank of Canada's ability to prevent recessions?
A)The Bank of Canada is able to "fine tune" the economy and entirely eliminate recessions.
B)The Bank of Canada is incapable of changing aggregate demand through its monetary policy tools.
C)The Bank of Canada is able to keep a recession shorter and milder than it would otherwise be.
D)The Bank of Canada is able to eliminate the business cycle and achieve absolute price stability.
E)The Bank of Canada is able to eliminate all but the most severe recessions.

Question

Quizplus · Accepted Answer

The Bank of Canada is able to use its monetary policy tools to influence aggregate demand and therefore the economy as a whole. However, it does not have the ability to completely eliminate recessions. Its actions can help to mitigate the severity and length of a recession, but it cannot prevent them entirely. Therefore, choice C is the most accurate characterization.

Which of the Following Characterizes the Bank of Canada's Ability