To remove an inflationary gap,the Bank of Canada would probably seek to

Question

Quizplus · Accepted Answer

To remove an inflationary gap, the Bank of Canada would seek to decrease aggregate demand (spending). One way to do this is to increase interest rates, which would encourage people to save more and borrow less. This would result in less spending in the economy, which would help to decrease demand and reduce inflationary pressures. Therefore, the Bank of Canada would likely increase its target for the overnight interest rate.

To Remove an Inflationary Gap,the Bank of Canada Would Probably