Suppose the Bank of Canada decreased the growth rate of the money supply. Which of the following would permanently decrease?

Question

Quizplus · Accepted Answer

Decreasing the growth rate of the money supply would lead to a decrease in the inflation rate, but it would not necessarily permanently decrease the natural rate of unemployment. The natural rate of unemployment is influenced by a variety of factors, such as demographics, technology, and institutional arrangements, which are unlikely to be affected by changes in the growth rate of the money supply. However, a temporary decrease in the inflation rate might lead to a decrease in the nominal wage rate, which could reduce labor costs and stimulate employment in the short run.

Suppose the Bank of Canada Decreased the Growth Rate of the Money