One of the Methods the Bank of Canada Uses to Change

question 37

Essay

One of the methods the Bank of Canada uses to change the money supply is open-market operations. Use the aggregate demand-aggregate supply model to illustrate graphically the impact in the short run and the long run of a Bank of Canada decision to increase open-market purchases. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; v. the short-run equilibrium values; and vi. the long-run equilibrium values. State in words what happens to prices and output in the short run and the long run.

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Definitions:

Employment

The condition of having paid work; the relationship between an employer and an individual who is compensated for performing specified tasks or services.

Government Subsidy

Financial assistance provided by the government to individuals, organizations, or industries to support certain activities or reduce costs.

Market Price

The present cost at which a product or service is available for purchase or sale in a specific market.

Product Sellers

Entities that offer goods or services for sale to consumers.