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.
a. The bank of Canada’s bond traders buy bonds in open-market operations.
b. An increase in credit card availability reduces the cash people hold.
c. Households decide to hold more money to use for holiday shopping
d. A wave of optimism boosts business investments and expands aggregate demand.
e. An increase in oil prices shifts the short run aggregate supply curve to the left.