a. What are the main features of the Canadian economy in the second quarter of 2011?
b. Did Canada have a recessionary gap or an inflationary gap in 2011? How do you know?
c. Looking at Fig. 1 on p. 641, use the AS-AD model to show the changes in aggregate demand and aggregate supply that occurred in 2009 and 2010 that brought the economy to its situation at the end of 2010.
d. Use the AS-AD model to show the changes in aggregate demand and aggregate supply that would occur if monetary policy cut the interest rate and increased the quantity of money by enough to restore full employment.
e. Use the AS-AD model to show the changes in aggregate demand and aggregate supply that would occur if the federal government increased its expenditure on goods and services or cut taxes further by enough to restore full employment.
f. Use the AS-AD model to show the changes in aggregate demand and aggregate supply that would occur if monetary and fiscal policy stimulus turned out to be too much and took the economy into an inflationary gap. Show the short-run and the long-run effects.