Exhibit 14-5 -Refer to the Graph in the Exhibit.To Bring the Economy

question 72

Multiple Choice

Exhibit 14-5

-Refer to the graph in the exhibit.To bring the economy to its potential output level, what should the Bank of Canada do?  

• A) The Bank of Canada should do nothing, and the price level will fall to P′.
• B) The Bank of Canada should do nothing, and the price level will remain at its current level.
• C) The Bank of Canada should increase the money supply and decrease the price level to P′.
• D) The Bank of Canada should decrease the money supply and decrease the price level to P′.

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Definitions:

Held-to-Maturity Debt Securities

Debt securities that a company has the intent and ability to hold until they mature.

Impairment Loss

The amount by which the carrying value of an asset exceeds its recoverable value, necessitating a write-down of the asset’s value on the balance sheet.

IFRS

International Financial Reporting Standards, which are a set of accounting rules used globally to prepare and present financial statements.

Foreign Currency Transaction

A business operation involving the exchange of currencies from two different countries.