When the Bank of Canada raises its key policy rate,it sends a signal to financial intermediaries that it wants them to

Question

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When the Bank of Canada raises its key policy rate, it wants to decrease borrowing and spending in the economy to prevent inflation. To achieve this, it sends a signal to financial intermediaries such as banks to increase their short-term interest rates, which in turn makes borrowing more expensive and slows down spending.

When the Bank of Canada Raises Its Key Policy Rate,it