If the Bank of Canada is worried about inflation it will ________ the overnight rate to ________.

Question

Quizplus · Accepted Answer

If the Bank of Canada is worried about inflation, it will raise the overnight rate to decrease spending and borrowing, which will shift the aggregate demand curve leftward. This will decrease both inflation and potential GDP, but the focus is on reducing inflation. Lowering the overnight rate would have the opposite effect, increasing inflation and shifting the aggregate demand curve rightward.

If the Bank of Canada Is Worried About Inflation It