Question: A3. In Brazil, a recently introduced digital payment system, called Pix, has enabled individuals to pay the merchants quickly and at zero cost via QR

A3. In Brazil, a recently introduced digital payment system, called Pix, has enabled individuals to pay the merchants quickly and at zero cost via QR codes. This system has been quickly adopted by over a 100 million people, reducing their demand for cashl. a) Assuming that this was a temporary shock, analyze the short run results of this innovation on the Brazilian output and the ERS.-'Euro graphically (assuming there is no policy response) using the AADD model. Explain the mechanisms verbally b) What should the government of Brazil do to stabilize the output at its short run level before the innovation occurred? Explain graphically and verbally

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