29.3 Reducing Inflation
The three figures below show the phases of a disinflation.In part (i),the economy is experiencing a sustained inflation at E 1 . FIGURE 29-4
-Refer to Figure 29-4,part (i).The elimination of the inflationary gap would normally be initiated by

Question

29.3 Reducing Inflation
The three figures below show the phases of a disinflation.In part (i),the economy is experiencing a sustained inflation at E 1 .  FIGURE 29-4
-Refer to Figure 29-4,part (i).The elimination of the inflationary gap would normally be initiated by

Quizplus · Accepted Answer

The elimination of the inflationary gap would normally be initiated by the Bank of Canada stopping the ongoing monetary expansion. This is because the constant expansion of the money supply fuels inflation, and stopping it will reduce inflationary pressures in the economy. Other options such as wage reduction, productivity increase, tax cuts, and transfer payments may also help to reduce inflation, but they are not the immediate actions that would initiate the disinflationary process.

29.3 Reducing Inflation The Three Figures Below Show the Phases of a Disinflation.In