MacroEconomics questions!ASAP! please help!?

1.suppose bank install automatic teller machines on every block and, by making cash readily available,reduce the amount of money people want to hold.(a)Assume the Bank of Canada does not change the money supply.according to the theory of liquidity preference,what happens to the interest rate?what happens to aggregate demand?Assume a closed economy.(b)If the Bank of Canada want to stabilize aggregate demand,how should it respond?

2.suppose the Bank of Canada believed that the natural rate of unemployment was 6%when the actual natural rate was 5.5%.If the Bank of Canada based its policy decisions on its belief,what would happen to the economy?

3.Policymakers who want to stabilize the economy must decide how much to change the money supply,government spending,or tax.Why is it difficult for policymakers to choose the appropriate strength of their actions?

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MacroEconomics questions!ASAP! please help!?horses for loan

1. (a) The Bank of Canada may not increase money supply, But the opeople in general will hold less cash with them and deposit the surplus with the banks as they are withdrwable by using ATMs. This menas banks will effectively have more demand deposits which will allow them to lend more money. if required by offering lower rate of interest, and the money multiplier will start operating and the money supply will get enlarged with an expansionary effect on aggregate demand, income and employment. The extra currency in circulation will be absorbed by demnand for cash only as interest rate gioes down.

1(b).If the Bank of Cnada wants to stabilize aggregate demand by offsetting the expansionary effects of ATM network expansion, it can do any one or more of the following

things: raise the reserve ratio for the banks, mop of part of the cash/ liquid money by selling bonds to the banks and other in the market and raising the discount rate or interest rates on govt. bonds.

2. Since the Bank of Canada believes in a higher than the true actual rate of natural unemployment, it would tend to delay the timing of its anti- defationary stabilizing policies. It would start expansionary monetary policies only after the economy has already entered into a recssion with unemloyment rate exceeding the 5.5% level,. That would mean the economy will be hurt for longer than was necessary. Similarly, the Bank of Canada will start initiating contractionary policies earlier than warranted.

3. The reasons why policymakes find it difficult to choose the appropriate strength of their actions in terms of how much to change the money supply,government spending,or tax is because of three reasons: they often cannot estmate or predic with accuracy as to when the economy enters the inflation phase or recessuion phase and with what pace; they are also not sure of the the time period involved in the transmission of their policy decisions to work through the economy to bring about the desired effect, and the relative popularity or ootherwise of the actions like higher taxes, lower spendinggs on the poor or raisng of the interest rates.