If the economy is at potential output and the Bank of Canada decreases the money supply,in the short run the price level will likely_____ and real GDP will likely_____ .

Question

Quizplus · Accepted Answer

A decrease in the money supply typically leads to higher interest rates, which reduces investment and consumer spending, leading to a decrease in aggregate demand. This results in a lower price level and a decrease in real GDP in the short run.

If the Economy Is at Potential Output and the Bank