To keep inflation from falling below the target range, the Bank of Canada ________.
A) decreases the target for the overnight rate which causes the dollar to go down
B) decreases the target for the overnight rate which causes the dollar to go up
C) increases the target for the overnight rate which causes the dollar to go down
D) increases the target for the overnight rate which causes the dollar to go up

Question

Quizplus · Accepted Answer

Decreasing the target for the overnight rate typically leads to lower interest rates, which can stimulate economic activity by making borrowing cheaper. This can help prevent inflation from falling below the target range. Additionally, lower interest rates often lead to a depreciation of the currency, in this case, causing the Canadian dollar to go down in value relative to other currencies.

To Keep Inflation from Falling Below the Target Range, the Bank