Suppose the Actual Overnight Interest Rate Is 4

question 30

Multiple Choice

Suppose the actual overnight interest rate is 4%.If the Bank of Canada lowers its target for the overnight rate to 3.75%,the money supply will eventually

• A)increase as a result of open-market operations.
• B)increase as a result of an increase in excess reserves in the banking system.
• C)decrease as a result of an increase in excess reserves in the banking system.
• D)decrease as a result of open-market operations.
• E)decrease as a result of a decrease in the demand for new loans.