1) Suppose that the Bank of Canada considered adopting either a price level targeting regime or inflation averaging regime. At a monthly frequency the target price levels under these regimes would be: (1) 12 Price level targeting (1-7)P+ + ypo + (1 + Yt) 27* Inflation averaging: (1-3)P+ Pest 12 1 7 (2) where p is the natural log of the price level and Te* the long-run inflation target. (a) For a given period, t, for what values of y and s are the price level targets from these two rules the same? (b) Rewrite the price level targets above as inflation targets by subtracting the log of the price level in the same period of the previous year. 1) Suppose that the Bank of Canada considered adopting either a price level targeting regime or inflation averaging regime. At a monthly frequency the target price levels under these regimes would be: (1) 12 Price level targeting (1-7)P+ + ypo + (1 + Yt) 27* Inflation averaging: (1-3)P+ Pest 12 1 7 (2) where p is the natural log of the price level and Te* the long-run inflation target. (a) For a given period, t, for what values of y and s are the price level targets from these two rules the same? (b) Rewrite the price level targets above as inflation targets by subtracting the log of the price level in the same period of the previous year