When the Bank of Canada Decreases the Bank Rate, Banks

question 54

Multiple Choice

When the Bank of Canada decreases the bank rate, banks will borrow more from the Bank of Canada. Which statement best describes the outcomes of this process?

• A) Banks lend more to the public, and so the money supply will decrease.
• B) Banks lend less to the public, and so the money supply will decrease.
• C) Banks lend more to the public, and so the money supply will increase.
• D) Banks lend less to the public, and so the money supply will increase.

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Definitions:

Positive Correlation

A statistical relationship where two variables move in tandem; as one variable increases, the other does as well.

Bivariate

Involving or dependent on two variables, often used in statistical analyses to examine the relationship between two sets of data.

Continuous Variables

Variables that can take an infinite number of values within a given range.

Product-moment

A statistical measure of the linear correlation between two variables, often expressed as Pearson's correlation coefficient.