The implementation of a contractionary policy by the Bank of Canada would result in which of the following?
A) lower unemployment
B) increased economic growth
C) lower interest rates
D) lower inflation

Question

Quizplus · Accepted Answer

A contractionary policy involves increasing interest rates and reducing the money supply to control inflation. This is done to slow down growth in the economy and reduce inflationary pressures. As a result, the best choice would be D - lower inflation. Lower unemployment and increased economic growth are typically associated with an expansionary policy, which involves lowering interest rates and increasing the money supply to stimulate the economy. Lower interest rates are also associated with an expansionary policy, as they make borrowing cheaper and encourage spending.

The Implementation of a Contractionary Policy by the Bank of Canada