The Implementation of an Expansionary Policy by the Bank of Canada

question 143

Multiple Choice

The implementation of an expansionary policy by the Bank of Canada would result in which of the following?

• A) higher unemployment
• B) lower inflation
• C) lower interest rates
• D) decreased economic growth

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Definitions:

Normal Profit

The minimum level of profit necessary for a company to remain competitive in the market, essentially covering opportunity costs.

Economic Profit

Profits calculated after considering both explicit costs, like materials and labor, and implicit costs, like opportunity costs, differentiating it from accounting profits.

Pure Rate of Interest

The theoretical return on an investment with no risk of financial loss, representing the time value of money.

Real Interest Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing and the true yield on investments.