Suppose the actual overnight interest rate is 4 percent. If the Bank of Canada lowers its target for the overnight rate to 3.75 percent, the money supply will eventually
A) decrease as a result of open- market operations.
B) increase as a result of an increase in excess reserves in the banking system.
C) decrease as a result of a decrease in the demand for new loans.
D) decrease as a result of an increase in excess reserves in the banking system.
E) increase as a result of open- market operations.
Correct Answer:
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