When the Bank of Canada Increases the Interest Rate We

question 19

Multiple Choice

When the Bank of Canada increases the interest rate we call this a contractionary monetary policy.Why?

• A)The higher interest rate leads to an increase in the level of national saving.
• B)The higher interest rate causes a contraction of money demand.
• C)The higher interest rate causes the money demand curve to shift to the left.
• D)The higher interest rate leads to a leftward shift of the aggregate demand curve.
• E)The higher interest rate causes the money supply curve to shift to the right.

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