In 2008, at a time when many advanced economies were close to full employment, stock markets in Canada and many other developed countries experienced very large declines. These declines were 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.The wealth of the households and firs who owned the companies whose stock-market value declined A. rises, leading to increase in desired consumption and desired investment. Therefore, AD curve shifts to the left.O B. rises, leading to increase in desired consumption and desired investment. Therefore, AD curve shifts to the right. C. falls, leading to reduction in desired consumption and desired investment. Therefore, AD curve shifts to the left. D. falls, leading to reduction in desired consumption and desired investment. Therefore, AD curve shifts to the right.b. If the central banks attempt to keep output close to Y*, what is their likely response?The likely response by central banks is A. to reduce the supply of money in order to decrease the level of desired investment expenditure. B. to increase interest rates in order to reduce excess supply of money. C. to reduce interest rates in order to stimulate aggregate demand.O D. to increase interest rates in order to appreciate their currency and increase imports.c. Did the Bank of Canada act as predicted in part (b)? A. No, the Bank of Canada didn't change its policy rate from early 2008 to mid-2009.O B. Yes, the Bank of Canada reduced its policy rate slightly, by 50 basis points (0.5 percentage points) from early 2008 to mid-2009.O C. Yes, the Bank of Canada reduced its policy rate dramatically, by roughly 400 basis points (4 percentage points) from early 2008 to mid-2009. D. No, the Bank of Canada increased its policy rate by 100 basis points (1 percentage points) from early 2008 to mid-2009.