Consider the monetary transmission mechanism. If the Bank of Canada were to increase the money supply, we would expect a large increase in aggregate demand if the money demand function

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If the money demand function is relatively steep, this means that a small change in the interest rate will result in a large change in the quantity of money demanded. If the investment demand function is relatively flat, this means that a large change in interest rates will not result in a large change in investment demand. Therefore, an increase in the money supply will lead to a large increase in aggregate demand.

Consider the Monetary Transmission Mechanism