The economy is originally in long run equilibrium. Then, the bank of Canada increases the money supply making short run in output ________ and long run output _________. Select one:

a. increase; not change

b. increase; increase

c. not change; increase

d. not change; not change

When considering the opportunity cost of holding money, a person who decides to take more money out of the bank and hold it as cash:

Select one:

a.is not affected by unanticipated inflation.

b.can maintain a higher standard of living.

c.is giving up the interest that other assets could have earned.

d.is likely to be subject to money illusion.

The Canadian economy is in a recessionary gap. The Bank of Canada decides to use expansionary monetary policy to close that gap. As a result of this policy, in the short run the money supply will _____, the interest rate will _____, investment and consumption spending will _____, and real GDP will _____.

Select one:

a.increase; increase; decrease; decrease

b. increase; fall; increase; increase

c.decrease; fall; decrease; increase

d.decrease; increase; decrease; decrease