Illustrate what is the effect of this policy on the interest

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Reference no: EM1348626

Suppose that the Bank of Canada decides to expand the money supply.

a. Why would it be counterproductive for the Bank of Canada to fix the value of the exchange rate?

b. Illustrate what is the effect of this policy on the interest rate in the long run? How do you know?

Reference no: EM1348626

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