Suppose the Economy Is Producing at the Natural Rate of Output

Multiple Choice

Suppose the economy is producing at the natural rate of output. An open market purchase 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