When the Bank of Canada Increases the Interest Rate We

Multiple Choice

When the Bank of Canada increases the interest rate we call this a contractionary monetary policy.Why?

A) The higher interest rate leads to an increase in the level of national saving.
B) The higher interest rate causes a contraction of money demand.
C) The higher interest rate causes the money demand curve to shift to the left.
D) The higher interest rate leads to a leftward shift of the aggregate demand curve.
E) The higher interest rate causes the money supply curve to shift to the right.