Which of the following does not occur as a result of the Bank of Canada lowering the overnight loans rate?
A)the supply of loanable funds increase
B)the long-term real interest rate falls
C)exports increase
D)the inflation rate decreases
E)imports decrease

Question

Quizplus · Accepted Answer

Lowering the overnight loans rate by the Bank of Canada increases the supply of loanable funds, leading to a fall in short-term interest rates. This, in turn, can lead to a fall in the long-term real interest rate (choice B). A lower interest rate may also lead to a depreciation in the exchange rate, making exports cheaper and more competitive (choice C). However, it would not necessarily lead to a decrease in the inflation rate (choice D) or a decrease in imports (choice E). In fact, lower interest rates may increase aggregate demand, leading to higher inflation and imports.

Which of the Following Does Not Occur as a Result