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(b) Suppose the Canadian economy is experiencing high inflation, falling purchasing power and strong Aggregate Demand (AD). (i) Explain how the Government can use Fiscal

(b) Suppose the Canadian economy is experiencing high inflation, falling purchasing power and strong Aggregate Demand (AD).

(i) Explain how the Government can use Fiscal Policy to stabilize the Canadian economy. Please use a diagram in your answer....(4 marks)

(ii) Explain how the Bank of Canada can use Monetary Policy to stabilize the Canadian economy. Please use diagrams in your answer....(8 marks)

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Principles of Finance

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