Economic Analysis A few years ago, in a public address, the Deputy Governor of the Bank of Canada explained that, according to the analyzes of the Central Bank "(...) the Canadian economy is operating above production capacity and domestic demand remain strong, despite the reduction in credit conditions in the wake of the recent turbulence in financial markets. However, we pay particular attention to the relatively limited level of inflation in the country and to supplying it with dollars on the foreign exchange markets (...)" Within the framework of the OA-DA model that we have considered, this situation may be illustrated by the graph below: a. (10 points) Identify and justify with macroeconomic arguments - the long-term adjustments (i.e., possible shifts of the 3 curves listed on the graph) likely to be expected, all things being equal. b. (10 points) Identify and justify with macroeconomic arguments which are the implications for i. the rate of inflation, ii. the real growth rate, iii. the unemployment rate, and iiii. the output gap

Analyse de la Conjoncture Il y a quelques annees, dans une allocution publique, le sous-gouverneur de la Banque du Canada explique que, d'apres les analyses de la Banque centrale : Dans l'encadrement du modele OA-DA que nous avons etudie, cette situation peut etre illustree par le graphique ci-dessous : OALT P OACT. Po - DAo Yp Yo Y (PIB reel) a. (10 points) Identifiez - et justifiez par des arguments macroeconomicques - les ajustements a long terme (c'est-a-dire, les deplacements eventuels des 3 courbes identifiees sur le graphique) auxquels on peut s'attendre, toutes choses etant egales. b. (10 points) Identifiez - et justifiez par des arguments macroeconomicques quelles en sont les implications pour : i. le taux d'inflation, ii. le taux de croissanct reelle, iii. le taux de chomage, et