Question: Suppose output is at its potential level and then there is a sudden increase in food and energ}I prices. This increase 0 a. makes inflation

 Suppose output is at its potential level and then there is

Suppose output is at its potential level and then there is a sudden increase in food and energ}I prices. This increase 0 a. makes inflation targeting easier because it makes these problems less relevant. O b. would be offset by a decline in the Canadian dollar. making these price increases irrelevant. 0 c. would be unlikely to lead to an immediate policy response because it would not appear in "core\" inflation. Q d. would lead to an immediate polic},F response to prevent the opening of an inflationary gap. Q a. makes inflation targeting harder because these are closely related to excess demand in the economy

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