Exam 13: Inflation, Unemployment, and Bank of Canada Policy

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Question 141

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If the Bank of Canada attempts to continue reducing unemployment by manipulating monetary policy,which of the following would you expect to see?

A) The Bank of Canada's policies will be deflationary.
B) The Bank of Canada's policies will be inflationary.
C) The rate of inflation will fall as the Bank of Canada tries to reduce the unemployment rate.
D) The Bank of Canada will reduce the natural rate of unemployment.
E) The Bank of Canada will be become increasingly effective over time.

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Question 142

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Figure 13.2 Alt text for Figure 13.2: In figure 13.2,a graph shows the short-run and long-run Phillips curves. Long description for Figure 13.2: The x-axis is labelled,unemployment rate (percent) .The y-axis is labelled,inflation rate (percent per year) .3 points; A (5,3) ,B (3.8%,5.5%) ,C (6,1) are plotted on the graph.The points are connected to their respective coordinates on the x and y-axes with dotted lines.A straight line labelled,short-run Philips Curve,begins at the top left corner and slopes down to the bottom center,and passes through points A,B,and C.A straight line labelled,long-run Philips Curve,is perpendicular to the x-axis,begins from the x-axis value 5,and intersects the Short-run Philips Curve at point A. -Refer to Figure 13.2.The nonaccelerating inflation rate of unemployment,or NAIRU,is associated with which point rate in the figure above?