Consider the effects of events in the U.S. economy on the Canadian economy and on Canadian monetary policy. 1) If a economic boom begins in the United States, what is the likely effect on the Canadian aggregate demand? Explain. 2) If Canadian real GDP was equal to Y* (the potential GDP) before the U.S. boom began, what would be the likely response by the Bank of Canada to push Canadian GDP back to Y*? 3) Given the mobility of financial capital across international boundaries, what is the likely effect on Canadian aggregate demand from a policy by the U.S. Federal Reserve that raises U.S. interest rates? 4) Given your answer to part 3), explain why Canadian monetary policy might sometimes appear to “mirror” U.S. monetary policy even though the Bank of Canada is wholly independent from the U.S. Federal Reserve.
Consider the effects of events in the U.S. economy on the Canadian economy and on Canadian
1) If a economic boom begins in the United States, what is the likely effect on the Canadian aggregate
2) If Canadian real
3) Given the mobility of financial capital across international boundaries, what is the likely effect on Canadian aggregate demand from a policy by the U.S. Federal Reserve that raises U.S. interest rates?
4) Given your answer to part 3), explain why Canadian monetary policy might sometimes appear to “mirror” U.S. monetary policy even though the Bank of Canada is wholly independent from the U.S. Federal Reserve.
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