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Why Is Lowering the Bank Rate a Way to Expand

Question 126

Multiple Choice

Why is lowering the bank rate a way to expand the money supply?  


A)  because it encourages banks to borrow from the Bank of Canada so they can more easily accommodate their customers' needs for loans 
B)  because it encourages business customers to borrow directly from the Bank of Canada 
C)  because a lower bank rate reduces the amount of reserves banks desire to keep 
D)  because a lower bank rate automatically reduces excess reserves

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