Using the Money Demand and Money Supply Model, an Open

question 251

Multiple Choice

Using the money demand and money supply model, an open market sale of government of Canada securities by the Bank of Canada would cause the equilibrium interest rate to

• A)increase.
• B)decrease.
• C)not change.
• D)increase, then decrease.

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Definitions:

Unemployment

Unemployment refers to the situation when individuals who are capable of working and are actively seeking employment are unable to find a job.

Financial Crisis

A situation where financial assets suddenly lose a large part of their nominal value, often leading to bankruptcies and economic downturns.

Phillips Curve

An economic concept illustrating an inverse relationship between the level of unemployment and the rate of inflation.

Inflation Rate

The percentage rate of increase in price levels over time, which can erode purchasing power.