Table 11.3
-Refer to Table 11.3.Consider the hypothetical information in the table above for potential real GDP, real GDP, and the price level in 2017 and in 2018 if the Bank of Canada does not use monetary policy.If the Bank of Canada wants to keep real GDP at its potential level in 2018, it should
A)buy government securities.
B)sell government securities.
C)increase the desired reserve ratio.
D)increase income taxes.
E)raise the target for the overnight rate.

Question

Table 11.3 
-Refer to Table 11.3.Consider the hypothetical information in the table above for potential real GDP, real GDP, and the price level in 2017 and in 2018 if the Bank of Canada does not use monetary policy.If the Bank of Canada wants to keep real GDP at its potential level in 2018, it should
A)buy government securities. 
B)sell government securities. 
C)increase the desired reserve ratio. 
D)increase income taxes. 
E)raise the target for the overnight rate.

Quizplus · Accepted Answer

Buying government securities is a monetary policy tool used by central banks to inject money into the economy, which can help in increasing real GDP to its potential level by lowering interest rates and encouraging borrowing and spending.

Table 11.3 -Refer to Table 11.3.Consider the Hypothetical Information in the Table