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What Is the Impact on Interest Rates When the Bank

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Essay

What is the impact on interest rates when the Bank of Canada decreases the money supply by selling bonds to the public?


Definitions:

Expected Return

The average of all possible returns for an investment, weighted by the likelihood of each outcome.

Risky Asset

Asset that provides an uncertain flow of money or services to its owner.

Risk-free Asset

A financial instrument that is considered to have minimal risk of financial loss, such as government bonds.

Intercept

A term in mathematics and economics indicating the value where a function or line crosses an axis on a graph.

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