If the Bank of Canada attempts to increase real GDP and employment by ________ its target for overnight rate,it is conducting ________ monetary policy.
A) raising; expansionary
B) raising; contractionary
C) lowering; expansionary
D) lowering; contractionary

Question

Quizplus · Accepted Answer

When the Bank of Canada lowers its target for the overnight rate, it makes borrowing cheaper for businesses and individuals, which in turn leads to an increase in investment and consumption. This leads to an increase in aggregate demand and economic activity, ultimately resulting in higher real GDP and employment. This type of policy is known as expansionary monetary policy.

If the Bank of Canada Attempts to Increase Real GDP