In March 2022 the Bank of Canada (BoC) increased its policy interest rate in an effort to increase interest rates throughout the economy.

How will aggregate demand be affected, whether we treat the economy as closed or open? (Illustrate in a diagram.) Under what circumstances would this policy be appropriate if the BoC was pursuing an inflation targeting mandate? (Illustrate in your diagram.)

Advice from the teacher: you are looking for a graph that has and AD curve, a SRAS curve and a LRAS curve.