Assume That the Bank of Canada's Policy Is to Keep

question 25

Multiple Choice

Assume that the Bank of Canada's policy is to keep the price level from either rising or falling.If aggregate supply decreases in the economy,the Bank of Canada:

• A)will have to decrease interest rates if it wishes to keep the price level from falling
• B)will have to increase the money supply if it wishes to keep the price level from falling
• C)will have to decrease the money supply if it wishes to keep the price level from rising
• D)can keep the price level stable without altering the money supply or interest rate
• E)will have to increase the money supply if it wishes to keep the price level from rising

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