Suppose Canadian Real GDP Is Equal to Potential GDP

question 114

Multiple Choice

Suppose Canadian real GDP is equal to potential GDP.A significant and sustained appreciation of the Canadian dollar on the foreign-exchange market then requires the Bank of Canada to

• A)engage in expansionary monetary policy to counter the rise in the dollar.
• B)engage in contractionary monetary policy to counter the rise in the dollar.
• C)identify the cause of the change in the exchange rate before taking any action to adjust policy.
• D)increase the target band for the inflation rate.
• E)increase the target band for the overnight lending rate.

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