To remove a recessionary gap, the Bank of Canada would probably seek to

Question

Quizplus · Accepted Answer

To remove a recessionary gap, the Bank of Canada would likely decrease its target for the overnight interest rate. This would promote borrowing and investment, increasing aggregate demand and reducing the output gap. Increasing the bank rate, selling government securities, or decreasing the target for the money supply would have the opposite effect, reducing aggregate demand and exacerbating the recessionary gap. Increasing the target for the overnight interest rate would also be counterproductive, as it would further restrict borrowing and investment.

To Remove a Recessionary Gap, the Bank of Canada Would