A monetary policy-caused reduction in the overnight lending rate will:
A)increase the prime interest rate.
B)decrease the size of the monetary multiplier.
C)increase the Bank of Canada rate.
D)decrease the prime interest rate.

Question

Quizplus · Accepted Answer

A reduction in the overnight lending rate will lower the cost of borrowing for banks, making it easier for them to lend money. This will lead to increased competition among banks to lower their lending rates to attract borrowers, resulting in a decrease in the prime interest rate.

A Monetary Policy-Caused Reduction in the Overnight Lending Rate Will