When the Bank of Canada Responds to Higher Inflation by Raising

question 209

Multiple Choice

When the Bank of Canada responds to higher inflation by raising real interest rates,

• A) consumption and investment spending rise and,thus,aggregate demand increases.
• B) consumption and investment spending fall and,thus,aggregate demand increases.
• C) consumption and investment spending rise and,thus,aggregate demand decreases.
• D) consumption and investment spending fall and,thus,aggregate demand decreases.
• E) the Bank of Canada changes its policy reaction function.

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