Figure 12.2 -Refer to Figure 12.2.Suppose the Economy Is Initially Above Potential

Multiple Choice

Figure 12.2

-Refer to Figure 12.2.Suppose the economy is initially above potential GDP,and the actual inflation rate is greater than the expected inflation rate.If the Bank of Canada wants to achieve the goal of price stability,the economy's new equilibrium would be at ________,with ________.

A) point B; lower inflation and a lower output gap
B) point C; unchanged inflation and a lower output gap
C) point A; higher inflation and a higher output gap
D) point C; higher inflation and an unchanged output gap