Canadian Securities Course (CSC) Level 1 Practice Exam

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What is the target inflation rate in Canada?

4-6%
7-9%
1-3%
0%

The correct answer is: 1-3%

The target inflation rate in Canada is set by the Bank of Canada, which aims for a rate of 1-3%. This target is part of the central bank's monetary policy framework, with a specific focus on maintaining price stability to foster economic growth. By keeping inflation within this range, the Bank of Canada seeks to provide a predictable economic environment, which is essential for consumers and businesses when making spending and investment decisions. The other ranges and zero suggest levels of inflation that would typically indicate either high inflation, deflation, or instability in the economy, which are contrary to the goals of maintaining a stable and growing economic landscape. Maintaining the inflation target within the 1-3% range allows for some inflation which is considered healthy for economic activity while avoiding the negative impacts associated with both high inflation and deflation.