Closed economy and small open economy

Reference no: EM1311407

Explain how each of the following developments would affect the supply of money, the demand for money, and the interest rate. For each case, show what happens in a closed economy and in a small open economy. Illustrate your answers with diagrams.

The Bank of Canada's bond traders buy bonds in open-market operations.

An increase in credit cared availability reduces the cash people hold.
Households decide to hold more money to use for holiday shopping.
A wave of optimism boots business investment and expands aggregate demand.

An increase in oil prices shifts the short-run aggregate supply curve to the left.

Reference no: EM1311407

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