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For each of the following events, describe the effects on the Canadian economy assuming that it is originally in long run equilibrium. For each, explain the short and long run effects in the context of an aggregate supply and aggregate demand diagram and any adjustment from short to long run equilibrium.
(a) As a result of a correction in Canadian housing prices, domestic consumption spending falls.
(b) The Bank of Canada pursues an expansionary monetary policy.
(c) The discovery of a cheap “cold fusion” technology reduces other energy prices [Hint: Canada is an exporter of traditional energy products.]
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