In September2015, the unemployment rate was 7.0percent, the inflation rate was 0.1percent, and the overnight loans rate target was 0.5 percent. In September2017, the unemployment rate was 6.2percent, the inflation rate was 1.4percent, and the overnight loans rate target was 1.0 percent.

Explain the dilemma that low inflation and low unemployment pose for the Bank of Canada.

The combination of low inflation and low unemployment presents the Bank of Canada with a dilemma because an interest rate______ the inflation rate______ the unemployment rate and creates the risk that inflation will______.

A.

cut toraise; lowers; rise too fast and overshoot its target range

B.

rise tolower; lowers; be stuck below target

C.

cut toraise; raises; be stuck below target

D.

rise tolower; raises; rise too fast and overshoot its target range