a) In response to the Covid pandemic, the Bank of Canada had adopted unconventional measures such as increasing the pace/speed of quantitative easing. At the same, the pandemic speeds up the process of moving the Canadian economy towards being a cashless society. What might happen to the long- run price level in Canada? Explain.

b) "Suppose the labour force and (physical) capital stock are growing at a rate of 2.5% and 3% respectively, and the labour share of income is 60%. In addition, the total factor productivity is increasing at 0.8%. If the velocity of money is rising at 2% and the central bank wants to obtain a target of inflation at 1.5%, then it should set a monetary growth rate of 5.5%." True/False/Uncertain, explain.

Note: All the growth rates are annual rates.

c) Suppose you are given the following information:

Real money demand function: L(i, Y) = 0.25Y - 200i

Output: Y = 8000 Money supply:MS = 3200

If the equilibrium real interest rate (r) is fixed at 4% and expected inflation rate is 2%, find the equilibrium price level and the real money balance. Note: Both nominal and real interest rates and the inflation rate are measured in percentage points, so if the interest rate is 5.7% this would be written as 5.7.

d) From Year 1 to Year 2, total employment increased by 427,400 workers, but the number of unemployed declined by only 182,600. How are these numbers consistent with each other? Why might one expect a reduction in the number of people counted as unemployed to be smaller than the increase in the number of people employed? Explain.