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Suppose that changes in bank regulations expand the availability of credit cards, so that people need to hold less cash. Use the money demand and

Suppose that changes in bank regulations expand the availability of credit cards, so

that people need to hold less cash. Use the money demand and supply diagram in the long run to answer

the following:

a. How does this event affect the demand for money? (explain with graph + words)

b. If the Bank of Canada does not respond to this event, what will happen to the price level?

c. If the Bank of Canada wants to keep the price level stable, what should it do? (show on graph + explain with words)

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