Suppose the Canadian economy had an inflationary gap.To decrease the level of aggregate desired investment,the Bank of Canada could

Question

Quizplus · Accepted Answer

To decrease the level of aggregate desired investment and address an inflationary gap, the Bank of Canada could raise its target for the overnight interest rate. This action would make borrowing more expensive, thereby reducing investment spending and helping to cool down the economy.

Suppose the Canadian Economy Had an Inflationary Gap