The Bank of Canada conducts open market operations with the primary goal of
A) affecting the overnight rate.
B) affecting the discount rate.
C) stabilizing the foreign-exchange market.
D) adjusting reserve requirements.

Question

Quizplus · Accepted Answer

The Bank of Canada conducts open market operations to influence the overnight rate, which is the interest rate at which banks lend funds to each other overnight. By buying or selling government securities, the Bank of Canada can increase or decrease the supply of funds available to banks, which in turn affects the overnight rate. The goal is to maintain a stable and appropriate level of inflation, which is the primary mandate of the Bank of Canada. Discount rates, foreign exchange rates, and reserve requirements are also important tools for the Bank of Canada, but they are not the primary goal of open market operations.

The Bank of Canada Conducts Open Market Operations with the Primary