From an initial long-run macroeconomic equilibrium, if the Bank of Canada anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply, then the Bank of Canada would most likely
A)decrease interest rates.
B)increase interest rates.
C)decrease income tax rates.
D)increase income tax rates.
E)leave interest rates unchanged.

Question

Quizplus · Accepted Answer

When the Bank of Canada anticipates that aggregate demand will grow significantly slower than long-run aggregate supply, it would likely decrease interest rates to stimulate borrowing and spending, thereby increasing aggregate demand to match the growth in long-run aggregate supply.

From an Initial Long-Run Macroeconomic Equilibrium, If the Bank of Canada