In 2007 and 2008,Canada was affected by the global financial crisis that had begun with the U.S.housing collapse.By early 2009,the Canadian economy was in a recession with Y

Question

In 2007 and 2008,Canada was affected by the global financial crisis that had begun with the U.S.housing collapse.By early 2009,the Canadian economy was in a recession with Y < Y*.What economic policies were implemented to close the output gap?

Quizplus · Accepted Answer

To close the output gap during a recession, where actual output (Y) is less than potential output (Y*), both expansionary monetary policy (to lower interest rates and increase money supply) and expansionary fiscal policy (to increase government spending and/or cut taxes) are typically implemented. These policies aim to stimulate economic activity and demand, helping to move the economy back towards its potential output.

In 2007 and 2008,Canada Was Affected by the Global Financial