n 2008, stock markets in canada experienced very large declines, largely in response to the failure of several large U.and European banks and the...

n 2008, stock markets in canada experienced very large declines, largely in response to the failure of several large U.S.and European banks and the resulting disruption in global financial markets.

a. explain how such stock market declines affect wealth and thus are likely to affect the ad curve. draw a graph to show the effect on price and output levels.

b.if the central bank attempts to keep output close to potential level y, what is its likely response?

c What fiscal policy will Canadian government use to keep output close to y? why?