How does a monetary injection by the Bank of Canada affect interest rates and aggregate demand?
A) It increases interest rates and increases aggregate demand.
B) It increases interest rates and decreases aggregate demand.
C) It decreases interest rates and decreases aggregate demand.
D) It decreases interest rates and increases aggregate demand.

Question

Quizplus · Accepted Answer

A monetary injection by the Bank of Canada increases the money supply in the economy, which in turn decreases interest rates as there is more money available to lend. This decrease in interest rates encourages borrowing and investment, ultimately leading to an increase in aggregate demand. So, the correct option is D, i.e., it decreases interest rates and increases aggregate demand.

How Does a Monetary Injection by the Bank of Canada