If the Bank of Canada lowers the overnight loans rate,the exchange rate ________,imports ________,and exports ________.

Question

Quizplus · Accepted Answer

Lowering the overnight loans rate would make it cheaper for banks to borrow money, which could lead to an increase in lending and therefore an increase in the money supply. This increase in the money supply would lead to a fall in the exchange rate, as there would be an increase in demand for imports and a decrease in demand for exports. Therefore, imports would become more expensive and exports would become cheaper, leading to a decrease in imports and an increase in exports.

If the Bank of Canada Lowers the Overnight Loans Rate,the