The increases in oil prices in 1974 due to OPEC's actions caused the short-run aggregate supply curve to shift to the left.Canada saw increases in both unemployment and inflation as a result.The Bank of Canada could not address both increased unemployment and increased inflation because
A) expansionary monetary policy which would lower unemployment would further increase inflation.
B) contractionary monetary policy which would lower inflation would further increase unemployment.
C) Canadians at the time preferred high unemployment to high inflation.
D) Both A and B are correct answers.
Correct Answer:
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