"Through the 1970s and 1980s, Canada, like many other countries, found that high inflation, large fiscal deficits, and rising public debt exacted a heavy toll on the economy" Remarks by David Dodge, Governor of the Bank of Canada to the Canadian Society of New York, New York City, N.Y. 20 February 2002.

After reading the above,

i) Discuss in detail what Fiscal Policy should be conducted by the Canadian Government.

ii) What would be the appropriate Monetary Policy for the above situation. Explain the Monetary tools and the transmission mechanism as the relate to the above economic problem.