Why Is Lowering the Bank Rate a Way to Expand

question 85

Multiple Choice

Why is lowering the bank rate a way to expand the money supply?  

• A) because it encourages banks to borrow from the Bank of Canada so they can more easily accommodate their customers' needs for loans 
• B) because it encourages business customers to borrow directly from the Bank of Canada 
• C) because a lower bank rate reduces the amount of reserves banks desire to keep 
• D) because a lower bank rate automatically reduces excess reserves

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