If the Bank of Canada wants to stimulate the economy to limit the effects of a recessionary gap, then it ________ the overnight loans rate to ________ the real interest rate and ________ investment.

Question

Quizplus · Accepted Answer

To stimulate the economy in a recessionary gap scenario, the Bank of Canada should lower the overnight loans rate. This will lead to a lower real interest rate, which will encourage investment and increase economic activity. Therefore, choice A is the correct answer as it states the correct sequence of actions.

If the Bank of Canada Wants to Stimulate the Economy