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Suppose you are the governor of the Bank of Canada, and the economy is experiencing a recession, what changes in (a) open market operation and

  1. Suppose you are the governor of the Bank of Canada, and the economy is experiencing a recession, what changes in (a) open market operation and (b) overnight loan rate and bank rate would you consider? Explain in each case how the change you advocate would affect chartered bank cash reserves and influence the money supply.
  2. Using diagrams, carefully explain trade-off between inflation and unemployment in S-R and L-R (using the concept of short-run and long-run Phillips Curve).

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