Suppose there is an inflationary gap and the Bank of Canada does not respond in any way to change its monetary policy. This scenario will lead to
A) a permanent decrease in output.
B) the emergence of a recessionary gap.
C) a wage- price spiral.
D) reduced transactions demand for money, an increase in the price of bonds, and a lower rate of interest.
E) an increase in wages and an upward shift of the AS curve.
Correct Answer:
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