When the Bank of Canada Responds to Higher Inflation by Raising

Multiple Choice

When the Bank of Canada responds to higher inflation by raising real interest rates,

A) consumption and investment spending rise and,thus,aggregate demand increases.
B) consumption and investment spending fall and,thus,aggregate demand increases.
C) consumption and investment spending rise and,thus,aggregate demand decreases.
D) consumption and investment spending fall and,thus,aggregate demand decreases.
E) the Bank of Canada changes its policy reaction function.