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.

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Definitions:

Parasympathetic Nervous System

A division of the autonomic nervous system that conserves energy as it slows the heart rate, increases intestinal and gland activity, and relaxes sphincter muscles.

Endocrine System

A network of glands in the body that secrete hormones directly into the circulatory system to regulate the body's growth, metabolism, and sexual development and function.

Billion

A numerical value equal to 1,000 million in the American system, and 1,000,000 million in systems that use the long scale.

Adult Brain

The matured human brain, fully developed and capable of complex cognitive, emotional, and behavioral processing.