The Principal Method Used by the Bank of Canada to Change

question 82

Essay

The principal method used by the Bank of Canada to change the money supply is through 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 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
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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