4. Current Bank of Canada Policy in the Dynamic AD-AS Model Since September 2021 Canadian inflation according to the CPI has exceeded 5%. Consider the following statement from the Bank of Canada Governor Tiff Macklem in March 2022 While we expect inflation to come down in the second half of this year as the pan- demic eases, it is currently well above our target...Higher oil prices have contributed to increased transportation costs, which, in turn, makes all goods more expensive. Food prices are being affected by extreme weather that has damaged crops across many regions. According to the above quotation, where do you think higher oil and food prices would appear in our dynamic AD-AS model? According to the model outlined in (1)-(5), what would you expect to happen to the endogenous variables Yt, Tt, it, and rị? Explain your answer

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4. Current Bank of Canada Policy in the Dynamic AD-AS Model
Since September 2021 Canadian inflation according to the CPI has exceeded 5%. Consider
the following statement from the Bank of Canada Governor Tiff Macklem in March 2022
While we expect inflation to come down in the second half of this
demic eases, it is currently well above our target ... Higher oil prices have contributed
to increased transportation costs, which, in turn, makes all goods more expensive.
Food prices are being affected by extreme weather that has damaged crops across many
regions.
year as
the
pan-
According to the above quotation, where do you think higher oil and food prices would
appear in our dynamic AD-AS model? According to the model outlined in (1)-(5), what
would you expect to happen to the endogenous variables Y;, Tt, it, and r¡? Explain your
answer
Transcribed Image Text:4. Current Bank of Canada Policy in the Dynamic AD-AS Model Since September 2021 Canadian inflation according to the CPI has exceeded 5%. Consider the following statement from the Bank of Canada Governor Tiff Macklem in March 2022 While we expect inflation to come down in the second half of this demic eases, it is currently well above our target ... Higher oil prices have contributed to increased transportation costs, which, in turn, makes all goods more expensive. Food prices are being affected by extreme weather that has damaged crops across many regions. year as the pan- According to the above quotation, where do you think higher oil and food prices would appear in our dynamic AD-AS model? According to the model outlined in (1)-(5), what would you expect to happen to the endogenous variables Y;, Tt, it, and r¡? Explain your answer
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