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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Definitions:

Operating Cash Flow (OCF)

Cash generated from a firm's normal business operations.

Erosion Effects

Erosion effects describe the gradual decrease or undermining of value, benefits, or productivity, often due to external factors such as competition or technological advancements.

Equivalent Annual Costs

A financial analysis method to determine the annual cost of owning, operating, and maintaining an asset over its entire life.

Use of Cash

Describes how a company spends its cash, encompassing operational expenses, investment activities, and financing activities.