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Question 6 (10 marks) Suppose that the Bank of Canada decides to expand the money supply. a. Why would it be counterproductive for Bank of

Question 6 (10 marks) Suppose that the Bank of Canada decides to expand the money supply.

a. Why would it be counterproductive for Bank of Canada to fix the value of the exchange rate? (5 marks)

b. What is the effect of this policy on the interest rate in the long run? How do you know? (5 marks)

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