In Which of the Following Situations Would the Bank of Canada

question 184

Multiple Choice

In which of the following situations would the Bank of Canada conduct contractionary monetary policy?

• A)The Bank of Canada believes that aggregate demand is growing too slowly to keep up with potential GDP.
• B)The Bank of Canada fears that unemployment is climbing above the natural rate.
• C)The Bank of Canada is concerned that aggregate demand may continue to exceed the growth in potential GDP.
• D)The Bank of Canada is worried that deflation will become a problem.
• E)The Bank of Canada is concerned that the exchange is below its operating band.

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Definitions:

Perfectly Competitive

A market structure characterized by many sellers and buyers, homogeneous products, and free entry and exit, leading to price takers on both sides.

ATC Curve

A graph that shows the average total cost of producing different quantities of a good or service, calculated by dividing the total cost by the quantity produced.

Positive Economic Profit

The excess amount by which total revenue surpasses the total costs, including opportunity costs of production.

Perfectly Competitive

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information.