Consider the Canadian economy initially at potential output.An economic expansion in the U.S._________ the demand for exports from Canada,resulting in an increase in Canada's planned aggregate expenditure and a(n)__________ output gap in Canada.

Question

Quizplus · Accepted Answer

An economic expansion in the U.S. increases the demand for exports from Canada, leading to an increase in Canada's planned aggregate expenditure. This increase in demand would cause an increase in production and economic activity beyond potential output, resulting in an expansionary output gap. Therefore, the best choice is B (increases; expansionary).

Consider the Canadian Economy Initially at Potential Output