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a. Explain how each of the following events affects the aggregate demand curve, the short-run aggregate supply curve, and the long run aggregate supply curve.
a. Explain how each of the following events affects the aggregate demand curve, the short-run aggregate supply curve, and the long run aggregate supply curve. i. Firms and workers reduce their expectations of future inflation ii. There is an unexpected decrease in the current inflation rate iii. There is a fall in oil prices b. How can a bank manager reduce the interest rate risk of her/his bank without reducing the bank's portfolio of securities or the maturities of the banks loans because it is expensive to do so in the short run? c. Is the total demand for money curve stable or sensitive to the state of the economy? d. Suppose that the equilibrium overnight rate is equal to the bank rate. Use the demand and supply. curves in the overnight money market to answer the following guestions i. Do the governors of the Bank of Canada BC need to take action and how in case they need to take the actions to achieve the goal of the Bank of Canada monetary policy? ii. In this case, what is the effect on the equilibrium overnight rate of a BC's transfer of the federal government deposits from the government accounts in commercial banks to its account at BC? iii. Will this action help the governors of the Bank of Canada achieve the goal of the Bank of Canada' s monetary policy if they need to take some action in view of the above assumption about the equilibrium overnight rate? iv. What are the effects of the transfer on borrowed reserves, non-borrowed reserves, the money supply, and the position of the supply and demand curves in the overnight money market
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