Safari % 100% Esa--11:59 Q ED mathxl.com Pearson\'s MyLab & Masterin. Take a Tes

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Safari % 100% Esa--11:59 Q ED mathxl.com Pearson's MyLab & Masterin. Take a Test Jiayun Zhang The Bank of Canada exercise. ECON 110 Chapter 29: Mone www.pearsoned.ca/highered/ Search Textbook Solutions Econ 102-008 (1) Jiayun Zhang | 1 1/28/17 1 1 :59 PM Quiz: Quiz Week 12: Ch. 28/29 Time Remaining: 00:42:15 Submit Quiz This Question: 1 pt 9 of 15 (7 complete) This Quiz: 15 pts possible If the Bank of Canada were to miscalculate the NAIRU (non-accelerating inflation rate of unemployment) as being 10% when in fact it was 12%, it might cause OA. a one-time reduction in unemployment, because of a one-time increase in the money supply and the price level. O B. consumers to spend more than they intended, because the Bank of Canada misled them about the unemployment rate. OC. accelerating inflation, becauseit would be unknowingly validating an inflationary gap O D. a reduction in the natural rate of unemployment, because it would be allowing inflation to occur. OE. a temporary decrease in inflationary expectations, because NAIRU measures the expected inflation rate. Click to select your answer

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Correct Answer:

E.

NAIRU is the level of unemployment rate below that inflation rate increases. Hence, miscalculating the NAIRU rate at 10% rather 12%, will also cause the inflation expectation to be at the lower level than it should be at the 12% NAIRU. Though, such lower expectation will be temporary in nature.

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