Question

The central bank of the country Oakville is hosting its annual economic policy symposium with monetary policy as the theme. Several bankers and professional economists are in attendance. Dorah​ Baker, a professor at the University of​ Oakville, is of the opinion that monetary policy should target the rate of growth of money supply.​ This, she​ claims, would increase economic stability. Jack​ Snyder, a delegate attending the​ conference, does not agree. He thinks that monetary policy is highly effective in controlling inflation and so the central bank should continue to follow​ inflation-targeting. In​ fact, Jack also believes that the central bank should bring inflation down from the current level of four percent to as close to zero as possible. Which of the​ following, if​ true, would weaken​ Dorah's claim that monetary policy should target the rate of growth of money​ supply?
A. Oakville's central bank has maintained the interest rate at 0.25 percent for the last two years.
B. The highest level of inflation that Oakville has ever experienced is 5.5 percent.
C. Although the current level of inflation is considered to be high, the economy has also been growing at an impressive pace.
D. The marginal propensity to save in Oakville has traditionally been low.
E. Inflation in recent years has been driven by rising costs of production.

Answer 1

Answer:

Option C - Although the current level of inflation is considered to be high, the economy has also been growing at an impressive pace.

Explanation:

Although the current level of inflation is considered to be high, the economy has also been growing at an impressive pace. The statement by Jack is true to follow for the economy's upliftment . The role of the central bank to reduce inflation could take place if the rate of interest is reduced to few percentage. It would decrease the excessive spending at the time of inflation. It would encourage the firms to raise the wages of labors for increased effective outputs.

Answer 2

Answer:

C. Although the current level of inflation is considered to be high, the economy has also been growing at an impressive pace.

Explanation:

It is so because the role of central bank to reduce inflation could take place if the rate of interest is reduced to few percentage. It would decrease the excessive spending at the time of inflation. It would encourage the firms to raise the wages of labour for increased effective outputs. It is true in order to achieve for a economic upliftment.

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