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Find the new interest rate

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Problem: Suppose the Bank of Canada (BOC) is trying o reserve this effect on the economy. For simplicity, it is not concerned about inflation for now. The BOC can drop the bank rate in order to stimulate investment spending (I). Suppose you work for the BOC and your boss Mark Carney has just dropped by your office to ask you what he should do. You need to find the new interest rate that is required to stimulate I. the increase in I has to be sufficient to push the overall Y level back to the original Y level that you have found in (i).

Reference no: EM13854897

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