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During Covid-19 the economy slowed down. Monetary policy makers at Bank of Canada lowered the overnight to 0.25%. a.What is the bank rate and the

During Covid-19 the economy slowed down. Monetary policy makers at Bank of Canada lowered the overnight to 0.25%.

a.What is the bank rate and the lending rate?

b.Assume that Aggregate Demand, Aggregate Supply, and potential output were all at equilibrium without any inflationary or recessionary gap. Use Aggregate Demand and Aggregate Supply diagram to demonstrate the economic shock of Covid-19

c.Demonstrate in the diagram what bank of Canada is expected to happen by reducing the overnight rate to 0.25%

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