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Suppose the Economy Is Producing at the Natural Rate of Output

Question 21

Multiple Choice

Suppose the economy is producing at the natural rate of output. An open market sale of bonds by the Bank of Canada will cause ________ in real GDP in the long run and ________ in the inflation rate in the long run, everything else held constant.


A) an increase; an increase
B) a decrease; a decrease
C) no change; an increase
D) no change; a decrease

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