Suppose the United States imposes tariffs on Canadian products. This has the effect of making Canadian goods more expensive in the U.S. Explain how this trade policy would affect the aggregate demand curve in Canada under each of the following conditions. Use diagrams of money market, the foreign exchange market and the output market for a small open economy in your answer and explain all the details clearly.

a. The Bank of Canada has adopted a flexible exchange rate.

b. The Bank of Canada has adopted a fixed exchange rate. (only explain, no new diagrams required)