Suppose Canadian Real GDP Is Equal to Potential GDP

question 114

Multiple Choice

Suppose Canadian real GDP is equal to potential GDP.A significant and sustained appreciation of the Canadian dollar on the foreign-exchange market then requires the Bank of Canada to

• A)engage in expansionary monetary policy to counter the rise in the dollar.
• B)engage in contractionary monetary policy to counter the rise in the dollar.
• C)identify the cause of the change in the exchange rate before taking any action to adjust policy.
• D)increase the target band for the inflation rate.
• E)increase the target band for the overnight lending rate.

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Definitions:

Wage Discrimination

The practice of paying different wages to employees who perform similar jobs, based on non-job-related factors like gender, race, or age.

Efficiency Wage

A wage set above the market equilibrium to increase productivity by encouraging higher effort or reducing turnover among employees.

Positive Amount of Unemployment

A situation where there is a nonzero level of unemployment in the economy, often considered normal due to frictions and transitions in the job market.

Market-clearing Wage

The wage rate at which the quantity of labor supplied equals the quantity of labor demanded.