Figure 104

-Refer to Figure 10 $\hat{Y}$ ₁,And Real GDP Increases So the Output Gap Increases To Equilibrium

question 78

Multiple Choice

Figure 10.4

-Refer to Figure 10.4...Suppose the economy's equilibrium starts out with an output gap of $\hat{Y}$ ₁,and real GDP increases so the output gap increases to $\hat{Y}$ ₂.If the Bank of Canada acts to keep the short-term nominal interest rate at the target and the term structure effect,the default-risk premium,and the expected inflation rate remain constant,then the long-term nominal interest rate will

• A) increase.
• B) decrease.
• C) remain constant.
• D) be indeterminate, since the Bank of Canada has no control over long-term rates.

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Definitions:

Sample Means

Average values derived from a subset (sample) of a larger population.

Standard Deviation

Square root of the variance that represents the average deviation of a score from the mean.

Sampling Distribution

The probability distribution of a given statistic based on a random sample, used to estimate properties of an underlying population.

Mean

The arithmetic average of a set of scores.