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Answer the following questions in writing.
a. Mr. Macklem describes several ways in which COVID-19 has affected the economy and has
made it more complicated for the Bank of Canada (BoC) to implement their inflation- targeting monetary policy framework. Summarize the different complications that the BoC is facing.
b. Mr. Macklem also talks about the different ways that the BoC adjusted their policies in response to COVID-19. One major goal of the BoC was to make sure “that credit would continue to flow”. Describe the different policy tools that the BoC used to maintain access to credit.
c. One of the first steps that the BoC took to combat the crisis was to lower their policy interest rate to the lowest possible level, 0.25 percent, to boost consumer confidence and economic activity. Using our model of Chapter 9 (“Central Banking and the Money Supply”), argue how a lowering of the interest rate charged on Central Bank lending helps to boost economic activity.