Canada is experiencing low inflation and real GDP is less than potential GDP.

Describe the Bank of Canada's actions that will restore full employment.

Question content area bottom left

Part 1

The Bank of Canada conducts an open market ______ to hit the new ______ overnight loans rate target.

A.

sale; higher

B.

purchase; lower

C.

sale; lower

D.

purchase; higher

Part 2

The monetary base

decreases

increases

.

The supply of money

decreases

increases

and

the interest rate

falls

rises

.

...

Question content area bottom right

Part 1

The supply of loanable funds ______ and the long-term interest rate ______.

A.

decreases; rises

B.

increases; falls

C.

increases; rises

D.

decreases; falls

Part 2

Investment ______, and aggregate demand ______ with a multiplier effect.

A.

decreases; decreases

B.

decreases; increases

C.

increases; increases

D.

increases; decreases