The increases in oil prices in 1974 due to OPEC's actions caused the short-run aggregate supply curve to shift to the left. Canada saw increases in both unemployment and inflation as a result. The Bank of Canada could not address both increased unemployment and increased inflation because OA) contractionary monetary policy which would lower inflation would further increase unemployment. O B) expansionary monetary policy which would lower unemployment would further increase inflation. OC) Canadians at the time preferred high unemployment to high inflation. O D) Both A and B are correct answers.

The increases in oil prices in 1974 due to OPEC's actions caused the short-run aggregate supply curve to shift to the left. Canada saw increases in both unemployment and inflation as a result. The Bank of Canada could not address both increased unemployment and increased inflation because OA) contractionary monetary policy which would lower inflation would further increase unemployment. O B) expansionary monetary policy which would lower unemployment would further increase inflation. OC) Canadians at the time preferred high unemployment to high inflation. O D) Both A and B are correct answers.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter15: Monetary Theory And Policy

Section: Chapter Questions

Problem 3.7P

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