1 question in 3 parts

1. During the covid 19 pandemic, Canada has initiated a number of policies aimed to support the income of Canadians during this crisis, such as tax deferrals and the Canada Emergency Response Benefit. What is the predicted effect of these policies on income, the price level and the interest rate? Give a detailed explanation of the economic reasoning behind the change in each variable. And use a diagram to help you but its optional.

2. At the same time as the policies were initiated the Bank of Canada cut its overnight rate from 1.75% to 0.25% and began purchasing government and corporate debt. Explain how each of these two actions would have led to an increase in the money supply in Canada.

3. How would this expansionary monetary policy change your answer to question 1? Use diagram and be sure to give a detailed explanation of the economic reasoning behind the change in each variable.