1. Explain how each of the following developments would affect the supply of money, the demand for money, and the interest rate. For each case, show what happens in a closed economy and in a small open economy. Illustrate your answers with diagrams.

a. The Bank of Canada's bond traders buy bonds in open-market operations.

b. An increase in credit card availability reduces the cash people hold.

c. Households decide to hold more money to use for holiday shopping.

d. A wave of optimism boosts business investment and expands aggregate demand.

e. An increase in oil prices shifts the short-run aggregate-supply curve to the left.