What Actions Could the Bank of Canada Take to Achieve

question 23

Multiple Choice

What actions could the Bank of Canada take to achieve consistent growth in real GDP at 4 percent per year?

• A)The Bank of Canada could increase in the growth rate of the money supply by 1% each year until the inflation rate was exactly equal to 4 percent.
• B)The Bank of Canada could maintain a growth rate of the money supply of 4 percent, regardless of whether inflation was rising or falling in the economy.
• C)The Bank of Canada could follow contractionary monetary policy that would reduce the overnight interest rate to zero so investment will rise consistently.
• D)The Bank of Canada has no direct control over real GDP in the long run, so there are no actions it could take to achieve that goal.
• E)The Bank of Canada could adopt a nominal GDP growth target; increasing inflation when the economy is growing slowly.