Which of the following best describes the consequences of a decrease in the bank rate?
A)Banks will borrow less from Bank of Canada so reserves increase.
B)Banks will borrow less from Bank of Canada so reserves decrease.
C)Banks will borrow more from Bank of Canada so reserves increase.
D)Banks will borrow more from Bank of Canada so reserves decrease.

Question

Quizplus · Accepted Answer

A decrease in the bank rate makes borrowing from the central bank cheaper for commercial banks, encouraging them to borrow more, which increases their reserves.

Which of the Following Best Describes the Consequences of a Decrease