5. Which of the following statements is TRUE?

(A) When supply rises, the price goes up.

(B) The GDP deflator can measure inflation.

(C) When demand falls, quantity rises.

(D) The Bank of Canada controls all interest rates.

6. If there is a shortage in the market for loanable funds, what happens?

(A) The supply for loanable funds shifts right and demand shifts left.

(B) Neither curve shifts. The quantity of loanable funds supplied decreases and the quantity demanded rises as the interest rate falls to equilibrium.

(C) The supply of loanable funds shifts left and demand shifts right.

(D) Neither curve shifts. The quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium.

7. A Toronto gun shop purchases a set of new Henry and Winchester rifles from the United States for $30,000 and sells them to Canadian clients for the same amount. How does this affect Canadian GDP?

(A) It increases consumption by $30,000, and thus increases GDP by $30,000.

(B) It increases investment by $30,000, and hence raises GDP by $30,000.

(C) It reduces GDP by $30,000, since net exports decrease by $30,000.

(D) It does not affect Canadian GDP.