Suppose the Bank of Canada Lowers Its Target for the Overnight

question 51

Multiple Choice

Suppose the Bank of Canada lowers its target for the overnight interest rate and longer-term interest rates in the market fall as a result.When this occurs,the commercial banks respond to

• A)an increase in the demand for loans by buying government securities from the Bank of Canada,against which they can extend new loans.
• B)an increase in the demand for loans by selling government securities to the Bank of Canada in exchange for cash,with which they can extend new loans.
• C)a decrease in the demand for loans by selling government securities to the Bank of Canada and calling in existing loans.
• D)a decrease in the demand for loans by buying government securities from the Bank of Canada in exchange for cash,and calling in existing loans.
• E)an increase in the demand for loans by borrowing cash from the Bank of Canada with which they can extend new loans.

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Definitions:

Koran

The Koran, also spelled Quran, is the holy book of Islam, believed to be the word of God (Allah) as revealed to the Prophet Muhammad.

Normative Structures

The unwritten rules and expectations that guide behavior within a society, including traditions, norms, and social standards.

Materialized Norms

Norms that have been established and accepted in a society, influencing behavior and social interactions.

Idealizations

The process of envisioning or treating something in an ideal form, often ignoring the realities or imperfections.