To close a recessionary gap using monetary policy,the Bank of Canada should _____ the money supply to _____ investment and consumer spending and shift the aggregate demand curve to the _____.

Question

Quizplus · Accepted Answer

In order to close a recessionary gap (which is a situation where aggregate demand is less than potential GDP), the Bank of Canada should increase the money supply to increase investment and consumer spending. This will shift the aggregate demand curve to the right, closing the gap. Therefore, the correct choice is (C) increase; increase; right.

To Close a Recessionary Gap Using Monetary Policy,the Bank of Canada