Which of the following best describes the outcome of a decrease in the bank rate?
A)Banks will borrow less from Bank of Canada, so reserves increase.
B)Banks will borrow less from Bank of Canada, so reserves decrease.
C)Banks will borrow more from Bank of Canada, so reserves increase.
D)Banks will borrow more from Bank of Canada, so reserves decrease.

Question

Quizplus · Accepted Answer

A decrease in the bank rate makes borrowing from the central bank cheaper, encouraging banks to borrow more, which increases their reserves.

Which of the Following Best Describes the Outcome of a Decrease