Counteracting fiscal or monetary policy

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Reference no: EM131095930

Explain and show graphically using AD-AS diagrams how each of the following would (separately) affect the economy first in the short run and then in the long run. Assume that Canada is initially operating at its full-employment level of output, that prices and wages are eventually flexible both upward and downward, and that there is no counteracting fiscal or monetary policy.

a. The Bank of Canada increases interest rates.

b. A stock market boom raises the wealth of Canadian households.

c. The federal government reduces Employment Insurance payments.

d. More Canadians decide to retire early and leave the labour force.

Reference no: EM131095930

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