Canada's economy is experiencing high inflation and real GDP is greater than potential GDP.

Describe the actions taken by the Bank of Canada to 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.

purchase; higher

B.

sale; higher

C.

sale; lower

D.

purchase; lower

Part 2

The monetary base

increases

decreases

.

The supply of money

increases

decreases

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.

increases; decreases

B.

increases; increases

C.

decreases; increases

D.

decreases; decreases