The following asks to examine the effects of the pandemic on the Canadian
economy. In here, we assume Canada is a closed economy and initially in its long-run equilibrium. Each part of the question is NOT related to other parts of the question.
a) Since the outbreak, the Bank of Canada pursued quantitative easing (QE) in attempt to stabilize the economy and, at the same time, many businesses promote the use of digital payment to minimize contacts. What happens to the long-run price level? Explain.
b) The pandemic has speeded up the use of automation and artificial intelligence (AI) in the production process.
• One group, say group A, believes that to some workers, this is bad news. Why? What would happen to the long-run unemployment rate to these workers? Explain. (8 points)
• The other group, say group B, believes that some workers could benefit from this. Why? What would happen to the long-run unemployment rate to these workers? Explain. (7 points)
Note: When analyzing the impact on the long-run unemployment rate, you should relate your answer to the job finding rate and the job separation rate.
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