When the Inflation Rate Is 4 Percent, the Bank of Canada

Multiple Choice

When the inflation rate is 4 percent, the Bank of Canada will

A) buy bonds to lower interest rates and increase aggregate demand.
B) sell bonds to raise interest rates and decrease aggregate demand.
C) do nothing, since an interest rate of 4 percent is desirable.
D) sell bonds to lower interest rates and accelerate the economy.
E) buy bonds to raise interest rates and slow down the economy.