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Suppose the Bank of Canada Reduces the Rate of Inflation

Question 63

Multiple Choice

Suppose the Bank of Canada reduces the rate of inflation by 4 percentage points.Suppose,as well,that the sacrifice ratio has a value of 2.5.Which of the following describes what happens to GDP?


A) GDP increases by 10 percentage points
B) GDP decreases by 10 percentage points
C) GDP increases by one-quarter of a percentage point
D) GDP decreases by one-quarter of a percentage point

Correct Answer:

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