Monetary policy decisions by the Bank of Canada are implemented through changes in
A) the money supply.
B) the prime rate.
C) the bank rate.
D) the overnight rate target.
E) long-term real interest rates.

Question

Quizplus · Accepted Answer

Monetary policy decisions by the Bank of Canada are primarily implemented through changes in the overnight rate target, which is the interest rate that banks use to lend and borrow funds among themselves on an overnight basis. This rate then affects other interest rates in the economy, which in turn affects overall levels of borrowing, spending, and inflation. Changes in the money supply, prime rate, bank rate, and long-term real interest rates may also have some impact on the economy, but they are not the primary tools of monetary policy used by the Bank of Canada.

Monetary Policy Decisions by the Bank of Canada Are Implemented