Based on the Bank of Canada's monetary policy rule,when inflation falls,the Bank of Canada ________ interest rates,hence _________ short-run equilibrium output.
A) increases;increasing
B) increases;decreasing
C) does not change;increasing
D) decreases;increasing
E) decreases;decreasing

Question

Quizplus · Accepted Answer

According to the Bank of Canada's monetary policy rule, when inflation falls, the Bank of Canada decreases interest rates to encourage borrowing and investment, which leads to an increase in short-run equilibrium output.

Based on the Bank of Canada's Monetary Policy Rule,when Inflation