When the Bank of Canada wants to raise the real interest rate in Canada,it announces a ________ overnight rate target (and the entire operating band around the overnight rate target shifts ________).In response,the commercial banks ________ the market interest rates,particularly,the short-term rates,by a similar amount.
A) higher;down;raise
B) lower;up;lower
C) higher;up;lower
D) higher;up;raise
E) lower;down;up

Question

Quizplus · Accepted Answer

When the Bank of Canada wants to raise the real interest rate, it announces a higher overnight rate target, which shifts the entire operating band around the overnight rate target up. In response, the commercial banks raise the market interest rates, particularly the short-term rates, by a similar amount. Therefore, option D is the best choice.

When the Bank of Canada Wants to Raise the Real