Suppose the Bank of Canada Reduces Its Target for the Overnight

question 86

Multiple Choice

Suppose the Bank of Canada reduces its target for the overnight interest rate by 0.50 percentage points.In this situation,the Bank will likely need to accommodate the eventual resulting change in the demand for money by

• A)increasing the supply of money by buying government securities on the open market.
• B)increasing the supply of money by selling government securities on the open market.
• C)decreasing the supply of money by buying government securities on the open market.
• D)decreasing the supply of money by selling government securities on the open market.
• E)maintaining the current supply of money which will increase the effectiveness of the change in the overnight interest rate.

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