Analyze the Following Statement,and Show What Would Happen in the Long

question 78

Essay

Analyze the following statement,and show what would happen in the long run if such advice were followed by the Bank of Canada: "The increase in the stock market has increased people's wealth.As a result,their consumption has increased,increasing aggregate demand and output.So the Bank of Canada needs to increase the money supply,since with higher income,people's demand for real money balances will be higher."

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