Initially, both Canada and the United Kingdom are in their respective long-run equilibrium. In March 2020, the Bank of England (BOE) cut the key interest rate to 0.1% and restarted quantitative easing in attempt to stabilize the British economy. Evaluate the effects of this change in BOE’s action on the C$/£ exchange rate and Canada’s output in both short run and long run. Explain and support your answer with ONE DD-AA diagram.

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