A problem with focusing on the CPI as the measure of inflation when conducting monetary policy is that... O a. The CPI distorts the value of commercial bank reserves. O b. The CPl is too stable to reflect accurately the changes occurring in the Canadian economy. O c. Many elements in the CPI change for reasons unrelated to the state of the Canadian economy. O d. It is closely related to the value of M2. O e. Changes in monetary policy have little effect on the CPI, especially in the long run. Suppose legislation required the government to balance its budget annually. With regard to real GDP, this rule would be... a. Stabilising because it smooths out the peaks and troughs of the business cycle. O b. Destabilising because the fiscal year is longer than the business cycle. O c. Stabilising because it allows greater flexibility in the design of fiscal policy. O d. Destabilising because fiscal policy is then procyclical. O e. Stabilising in most circumstances.

A problem with focusing on the CPI as the measure of inflation when conducting monetary policy is that... O a. The CPI distorts the value of commercial bank reserves. O b. The CPl is too stable to reflect accurately the changes occurring in the Canadian economy. O c. Many elements in the CPI change for reasons unrelated to the state of the Canadian economy. O d. It is closely related to the value of M2. O e. Changes in monetary policy have little effect on the CPI, especially in the long run. Suppose legislation required the government to balance its budget annually. With regard to real GDP, this rule would be... a. Stabilising because it smooths out the peaks and troughs of the business cycle. O b. Destabilising because the fiscal year is longer than the business cycle. O c. Stabilising because it allows greater flexibility in the design of fiscal policy. O d. Destabilising because fiscal policy is then procyclical. O e. Stabilising in most circumstances.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

A problem with focusing on the CPI as the measure of inflation when
conducting monetary policy is that...
O a. The CPI distorts the value of commercial bank reserves.
O b. The CPl is too stable to reflect accurately the changes occurring
in the Canadian economy.
O c. Many elements in the CPI change for reasons unrelated to the
state of the Canadian economy.
O d. It is closely related to the value of M2.
O e. Changes in monetary policy have little effect on the CPI,
especially in the long run.
Suppose legislation required the government to balance its budget
annually. With regard to real GDP, this rule would be...
O a. Stabilising because it smooths out the peaks and troughs of the
business cycle.
O b. Destabilising because the fiscal year is longer than the business
cycle.
O c. Stabilising because it allows greater flexibility in the design of
fiscal policy.
O d. Destabilising because fiscal policy is then procyclical.
O e. Stabilising in most circumstances.

One reason that inflation can persist even after its original causes have
been removed is that...
a. Inflationary expectations cause the AS curve to continue shifting
upwards.
O b. Governments embark on a deficit-cutting programme.
O c. Workers expect wage increases to match increases in labour
productivity.
O d. Workers are willing to accept wage increases lower than the
increase in productivity.
O e. The Bank of Canada ensures that money-supply growth
matches growth in real GDP.

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