In Order to Shorten a Recession When the Economy Is

question 142

Multiple Choice

In order to shorten a recession when the economy is producing below full employment, the monetary authority could:

• A) expand the money supply.
• B) raise taxes in order to close the budget deficit.
• C) contract the money supply.
• D) decrease government spending.

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Definitions:

GIC

Guaranteed Investment Certificate, a Canadian investment that offers a guaranteed rate of return over a fixed period, typically without the risk of losing the principal invested.

Investor

An individual or entity that allocates capital with the expectation of receiving financial returns.

Nominal Interest Rate

The interest rate as stated on a loan or financial product, not taking into account inflation or fees.

Annual Compounding

The method of accruing interest on the main amount of a deposit or loan annually.