If the Bank of Canada lowers its target for the overnight interest rate, this indicates that
A)the Bank of Canada is pursuing an expansionary monetary policy.
B)the Bank of Canada is pursuing a contractionary monetary policy.
C)the Bank of Canada is attempting to combat inflation.
D)the Bank of Canada is concerned that the growth in aggregate demand will exceed potential GDP.
E)the Bank of Canada is concerned that the unemployment rate has fallen below its natural rate.

Question

Quizplus · Accepted Answer

Lowering the target for the overnight interest rate indicates that the Bank of Canada is pursuing an expansionary monetary policy. This means that it is trying to stimulate economic growth by increasing the money supply and lowering borrowing costs, which can lead to increased spending and investment.

If the Bank of Canada Lowers Its Target for the Overnight