When the Bank of Canada fights recession by lowering the overnight loan rate, the supply of loanable funds curve shifts _______, and the aggregate demand curve shifts _______.

Question

Quizplus · Accepted Answer

When the Bank of Canada lowers the overnight loan rate, it becomes cheaper for banks to borrow money. This increases the supply of loanable funds, shifting the supply curve rightward. Cheaper borrowing costs also stimulate investment and spending, shifting the aggregate demand curve rightward.

When the Bank of Canada Fights Recession by Lowering the Overnight