Suppose the Bank of Canada implements monetary policy which results in an immediate increase in aggregate...
Suppose the Bank of Canada implements monetary policy which results in an immediate increase in aggregate demand of $12 Billion. If the spending multipler is 1.5 what would be the ultimate effect of this monetary policy on total economic output?
a) it would rise by $1.5 billion
b) it would fall by $12 billion
c) it would rise by $18 billion
d) no change
e)it would fall by $18 billion
Homework Answers
Answer is C
Reason rise in aggregate demand =$12 billion
spending multiplier=1.5
rise in total output= $12 billions * 1.5 = $ 18 billon
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