It is difficult for the Bank of Canada to remove a sustained inflation without producing stagflation because inflationary expectations cause the

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Inflationary expectations cause firms to increase prices, leading to a continuous shift in the AS curve upwards. To combat this, the central bank may increase interest rates, reducing aggregate demand and shifting the AD curve to the left. However, this can also lead to a decrease in output and employment, resulting in stagflation. Therefore, it is difficult for the Bank of Canada to remove a sustained inflation without producing stagflation.

It Is Difficult for the Bank of Canada to Remove