To increase the overnight lending rate, the Bank of Canada can:
A)buy government bonds from the public.
B)decrease the bank rate.
C)decrease the prime interest rate.
D)sell government bonds to chartered banks.

Question

Quizplus · Accepted Answer

Selling government bonds to chartered banks would decrease the money supply in the economy, making it more expensive for banks to borrow from one another and thus increasing the overnight lending rate. Buying government bonds from the public or decreasing the bank rate or prime interest rate would have the opposite effect, increasing the money supply and lowering the overnight lending rate.

To Increase the Overnight Lending Rate, the Bank of Canada