a. Using the AD-AS, MD-MS, AE, and PC models, show the Canadian economy with the following conditions:

• Real GDP - $1T
• Interest Rate - 1%
• Price Level - 150
• Natural Rate of Unemployment - 6%
• Money Supply - $100B
• Potential GDP - $1T
• Inflation Rate - 0.5%

Draw the graphs from this question using the whiteboard below.Label each curve with initials, but no subscript, ex. Money supply curve should be labelled as "MS".Do not move on to the next question until the status at the bottom of the whiteboard shows "Uploaded successfully".Be advised that only what is shown IN the box will be saved. Zoom out of what you have drawn to have it all saved. (4)

b. Suppose that six months later, the Canadian economy is experiencing stagflation.Using the same graphs from part a., show how the economy moved to this position(label each new curve with initials and the number 1, ex. If there is a new AE curve, label it "AE1").(4)

Then,briefly describein the textbox belowthe effects (increase, decrease, or no change) on: RGDP, IR, PL, NRU, unemployment, inflation, consumption and investment(4)

c. Suppose that, in response to the stagflation, the Government of Canada takes action to smooth the business cycle.Using the same graphs again, show how the economy responds to this action(label each new curve with initials and "G", ex. If there is another new AE curve, label it "AEG"). (3)

Then, briefly describe in the textbox below,the effects (increase, decrease, or no change) of the Government's action on: RGDP, IR, PL, NRU, unemployment, inflation, consumption and investment.(4)

d. If the Bank of Canada took action in response to the stagflation, rather than the Government,using the same graphs again,show how the economy would respond economy (label each new curve with initials and "B", ex. If there is another new AE curve, label it "AEB"). (3)e. Provide two strong (but brief) arguments for why it is better for the Bank of Canada to fight stagflation, and two strong (but brief) arguments for why it is better for the Government to fight stagflation,in the textbox below. (2)

f.Is it better to have neither the Bank of Canada nor the Government of Canada take action in response to the stagflation?Briefly explain why or why not in the textbox below?(2)