Question: Question 5 (12 points) Use the IS-LM model to predict the short-run effects of each of the following two shocks on income, the interest rate,

 Question 5 (12 points) Use the IS-LM model to predict the

Question 5 (12 points) Use the IS-LM model to predict the short-run effects of each of the following two shocks on income, the interest rate, consumption, and investment. In each case, explain what the Bank of Canada should do to keep income at its initial level. Be sure to use a graph in each of your answers. a) A wave of credit card fraud increases the frequency with which people make transactions in cash. (4 points for the explaining the effects on Y, r, c, and I + 2 points on the analysis of the Bank of Canada's policy response = 6 points) b) After the invention of a new high-speed computer chip, many firms decide to upgrade their computer systems. (4 points for the explaining the effects on Y, r, c, and I + 2 points on the analysis of the Bank of Canada's policy response= 6 points)

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