Now that the population is largely vaccinated and Covid number are falling the economy is resuming to a more normal environment. We have also learned that some inflation is present in the economy. Suppose that inflation is approaching 5 percent. Explain words the kind of policy the Bank of Canada would use in such an inflationaryenvironment. Specifically:

1. Name the policythe BoC would use
2. Why does the BoC care about inflation? Why might it be a problem?
3. What is theobjectivethat the BoC is trying to achieve by using the policy you indicated in Part A
4. Carefullydescribe two specific toolsthat the Bank of Canada would use in the policy you stated above.