Suppose the Bank of Canada Raises Its Target for the Overnight

question 85

Multiple Choice

Suppose the Bank of Canada raises its target for the overnight interest rate and longer-term rates in the market rise as a result.Households' and firms' demand for loans from the commercial banks would ________.In order to accommodate this change,the commercial banks require ________.

• A)rise; more government securities
• B)fall; more cash reserves
• C)rise; more currency
• D)remain stable; no change to their reserves
• E)fall; fewer cash reserves

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