Consider the Following Statement About Inflation Targeting: a Policy of Inflation

Multiple Choice

Consider the following statement about inflation targeting: A policy of inflation targeting acts as an automatic stabilizer in the economy,just like the automatic fiscal stabilizers.Choose the most appropriate response to this statement.The statement is

A) true,because an inflationary gap is met with a contractionary monetary policy.
B) true,because a recessionary gap is met with an expansionary monetary policy.
C) not true,because inflation targeting requires active policy decisions by the Bank of Canada,whereas automatic fiscal stabilizers need no policy implementation.
D) not true,because inflation targeting automatically maintains inflation within the target range,whereas fiscal stabilizers require government policy decisions.
E) true,because inflation targeting and fiscal stabilizers are essentially the same policy tool.