Suppose the Bank of Canada Reduces the Rate of Inflation

question 185

Multiple Choice

Suppose the Bank of Canada reduces the rate of inflation by 4 percentage points. Suppose, as well, that the sacrifice ratio has a value of 2. Which of the following describes what happens to GDP?

• A) GDP increases by 8 percentage points
• B) GDP decreases by 8 percentage points
• C) GDP increases by one-half of a percentage point
• D) GDP decreases by one-half of a percentage point

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Deductive Sequence

A logical process where conclusions are based on the concordance of multiple premises that are generally assumed to be true.

Inductive Sequence

A logical process where specific observations or examples are used to make general conclusions.

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