Suppose the Actual Overnight Interest Rate Is 3

question 7

Multiple Choice

Suppose the actual overnight interest rate is 3.5%.If the Bank of Canada raises its target for the overnight interest rate to 4%,and longer-term interest rates in the market rise as a result,

• A)the demand for loans from commercial banks falls,the commercial banks sell government securities to the Bank of Canada,and the money supply falls.
• B)the demand for loans from commercial banks rises,the commercial banks buy government securities from the Bank of Canada,and the money supply falls.
• C)the demand for loans from commercial banks rises,the commercial banks sell government securities to the Bank of Canada,and the money supply rises.
• D)the demand for loans from commercial banks falls,the commercial banks buy government securities from the Bank of Canada,and the money supply falls.
• E)the demand for loans from commercial banks rises the commercial banks buy government securities from the Bank of Canada,and the money supply rises.

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Definitions:

Transfer Price

The price charged for goods or services transferred between departments or subsidiaries within the same company.

Opportunity Cost

The price paid for not choosing the subsequent optimal alternative during decision-making.

Lost Contribution Margin

The profit forgone by not manufacturing or selling a product, represented by the contribution margin that would have been earned on each unit.

Aircraft Products Division

A specialized unit within a company focused on the manufacturing and development of products specific to aviation and aerospace uses.