Why Would Canadian Monetary Policy Be Ineffective If We Fixed

question 13

Multiple Choice

Why would Canadian monetary policy be ineffective if we fixed the value of our dollar to that of the U.S.dollar?

• A)Expanding the money supply in Canada would crowd out investment spending.
• B)Contracting the money supply in Canada would crowd out investment spending.
• C)Expanding the money supply in Canada would cause a rise in interest rates and an outflow of Canadian dollars and thereby frustrate the money expansion.
• D)Expanding the money supply in Canada would cause a fall in interest rates and an outflow of Canadian dollars and thereby frustrate the money\expansion.

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Definitions:

Promising Option

A potential solution or choice that shows substantial merit or advantage.

Reasonable Options

Choices or alternatives that are sensible and likely to bring about a desired outcome based on rational judgment.

Human Decision-Making

The cognitive process resulting in the selection of a belief or a course of action among several possible alternatives.

Promising Alternative

An option that shows potential to be effective or beneficial in comparison to others.