If the Bank of Canada Attempts to Increase Real GDP

question 37

Multiple Choice

If the Bank of Canada attempts to increase real GDP and employment by ________ its target for overnight rate,it is conducting ________ monetary policy.

• A) raising; expansionary
• B) raising; contractionary
• C) lowering; expansionary
• D) lowering; contractionary

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Definitions:

Income Effect

The alteration in a person's or an economy's earnings and the effect this alteration has on the demand for a product or service.

Price Change

An alteration in the cost of goods or services, which can go up or down, depending on various factors.

Diamond/Water Paradox

An observation in economics illustrating how water, which is essential to life, is cheap, while diamonds, which do not sustain life, are expensive.

Bundle of Goods

A combination of different goods and services that are considered together, often in the context of consumer choice, preferences, and budget constraints.