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:

Temporary Basis

Pertaining to a limited period of time; not permanent or enduring.

Group Processors

Individuals or mechanisms that manage, direct, or facilitate the work within a group towards achieving collective goals.

Interlocking Networks

A pattern of overlapping relationships and connections among people or organizations, which can facilitate information flow and collaboration.

Monopolistically Competitive

A type of market structure characterized by many sellers offering differentiated products, leading to competition based on product features, price, and quality.