In response to an inflationary gap, the Bank of Canada

Name: In response to an inflationary gap, the Bank of Canada
Brand: Quizplus
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Question

Quizplus · Accepted Answer

In response to an inflationary gap, the Bank of Canada would look to reduce spending by increasing the cost of borrowing. This can be achieved by selling bonds, which will drive up interest rates and reduce consumer and business spending, thereby slowing inflation. The correct answer is therefore C, as this represents the Bank of Canada raising the overnight rate by selling bonds.

In Response to an Inflationary Gap, the Bank of Canada