Given an inflationary gap,the Bank of Canada will use monetary policy to _____ real GDP and _____ the interest rate.

Question

Quizplus · Accepted Answer

In order to close the inflationary gap and reduce inflationary pressures, the Bank of Canada will use contractionary monetary policy to decrease real GDP through measures such as increasing interest rates. Thus, the correct choice is C: decrease real GDP and increase the interest rate.

Given an Inflationary Gap,the Bank of Canada Will Use Monetary