Problem [20 marks - marks for each part as shown] A2-5. In March 2022 the Bank of Canada (BoC) increased its policy interest rate in an effort to increase interest rates throughout the economy. (a) Using a diagram for the money market, explain the effect of the decision on interest rates there and how the BoC must respond to support this policy decision. [Hint: make sure to discuss the adjustment to the new equilibrium in the money market ] [5] (b) Suppose we treated Canada as a closed economy. What effect will the BoC"'s policy change have on investment, on aggregate expenditure? Include diagrams in your answer. [5] (c) What additional effect will there be on aggregate expenditure given that Canada is an open economy? [5] (d) How will aggregate demand be affected, whether we treat the economy as closed or open? (Illustrate in a diagram.) Under what circumstances would this policy be appropriate if the BoC was pursuing an inflation targeting mandate? (Illustrate in your diagram.) [5]