Suppose the Bank of Canada Increases Its Target for the Overnight

question 28

Multiple Choice

Suppose the Bank of Canada increases its target for the overnight interest rate by 0.25 percentage points.In this situation,the Bank will likely need to accommodate the 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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Definitions:

Cash Dividends

Payments made by a corporation to its shareholders, typically out of its profits or reserves.

Accrued Liabilities

Financial obligations that a company has incurred during a period but has not yet paid by the end of that period.

Accounts Payable

A liability account that records amounts a company owes to suppliers for goods and services purchased on credit.

Statement Of Cash Flows

A financial statement that provides aggregate data regarding all cash inflows and outflows a company receives from its ongoing operations, investment, and financing activities.