Assume the economy is initially in equilibrium where potential GDP is greater than real GDP.If the expected inflation rate,the term structure effect,and the default-risk premium are constant,a decrease in the Bank of Canada's target short-term nominal interest rate will ________ the MP curve and the output gap will become ________.
A) shift up; smaller
B) shift up; larger
C) shift down; smaller
D) shift down; larger

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The Answer of Assume the economy is initially in equilibrium where potential GDP is greater than real GDP.If the expected inflation rate,the term structure effect,and the default-risk premium are constant,a decrease in the Bank of Canada's target short-term nominal interest rate will ________ the MP curve and the output gap will become ________.
A) shift up; smaller
B) shift up; larger
C) shift down; smaller
D) shift down; larger

Assume the Economy Is Initially in Equilibrium Where Potential GDP