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Suppose There Is a Recessionary Gap and the Bank of Canada

Question 49

Multiple Choice

Suppose there is a recessionary gap and the Bank of Canada holds the money supply constant.This scenario will eventually lead to


A) an increase in wages and an upward shift of the AS curve.
B) a reduction in wages and a downward shift of the AS curve.
C) a permanent decrease in output.
D) the emergence of an inflationary gap.
E) increased transactions demand for money,and a higher rate of interest.

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