When would the Bank of Canada pursue an expansionary monetary policy? (3 marks)10.The full employment GDP of a country is $600 billion and the equilibrium level is $685 billion. The MPC (MPE) for the country is 0.8.

a.Is the above economy in contractionary period or an expansionary period (circle the correct answer)? (1 mark)

b.How much would GDP need to change to close the gap? (2 marks)

c.To close the Gap the government would have to increase / decrease (circle the correct answer) spending by how much (provide a dollar amount!)? (2 marks)

d.Would the government increase or decrease taxes to close this gap? (1 mark)

e) When would the Bank of Canada pursue an expansionary monetary policy? (3 marks)