Statistics Canada has recently reported historically high increases in the CPI. As Tiff Macklin, the governor...

 

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Statistics Canada has recently reported historically high increases in the CPI. As Tiff Macklin, the governor of the Bank of Canada, noted, higher inflation in Canada will help some Canadians, but it will certainly hurt others. Suppose that to combat inflation the Bank of Canada increases interest rates that cause a recession. The Trudeau government enacts a policy to increase spending by $6 billion. The MPS is 0.25. What would be the full increase in real Canadian GDP from the change in the federal government spending, assuming that the aggregate supply curve is horizontal across the range of GDP being considered? Statistics Canada has recently reported historically high increases in the CPI. As Tiff Macklin, the governor of the Bank of Canada, noted, higher inflation in Canada will help some Canadians, but it will certainly hurt others. Suppose that to combat inflation the Bank of Canada increases interest rates that cause a recession. The Trudeau government enacts a policy to increase spending by $6 billion. The MPS is 0.25. What would be the full increase in real Canadian GDP from the change in the federal government spending, assuming that the aggregate supply curve is horizontal across the range of GDP being considered?

Answer rating: 100% (QA)

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