If the Economy Is at Potential Output and the Bank

question 157

Multiple Choice

If the economy is at potential output and the Bank of Canada increases the money supply so that actual output exceeds potential output,eventually nominal wages will:

• A) increase.
• B) decrease.
• C) remain the same.
• D) fluctuate randomly.

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Definitions:

Loss

A financial condition where expenses exceed revenues, resulting in a negative net income for a business.

Sale of Equipment

The process of disposing of business equipment, which is recorded as a financial transaction affecting company assets.

Cash Flows

The inflows and outflows of cash and cash equivalents for a business, reflecting its operational, investing, and financing activities.

Operating Activities

Activities directly related to the running of a business for profit, including production, sales, and day-to-day operations.