If the Bank of Canada wants to eliminate an inflationary gap, it will

Question

Quizplus · Accepted Answer

To eliminate an inflationary gap, the Bank of Canada needs to slow down economic growth and decrease the demand for goods and services. One of the ways to achieve this is by raising the overnight rate, which directly affects the cost of borrowing for consumers and businesses. This decrease in borrowing reduces spending and investment, leading to a decrease in aggregate demand and ultimately reducing inflationary pressures.

If the Bank of Canada Wants to Eliminate an Inflationary