When the Bank of Canada changes the overnight rate by a certain amount,
A) all interest rates in the economy change by exactly that amount.
B) short-term interest rates usually change by that amount,but long-term interest rates may or may not change by the same amount.
C) long-term interest rates usually increase by that amount,but short-term interest rates may or may not change by the same amount.
D) interest rates on both 30-year and 1-year Government of Canada bonds usually increase by that amount.
E) interest rates on bonds issued by corporations usually increase by that amount,but the prime business rate may or may not change by the same amount.

Question

Quizplus · Accepted Answer

When the Bank of Canada changes the overnight rate, short-term interest rates usually change by that amount, but long-term interest rates may or may not change by the same amount. Long-term interest rates are influenced by factors such as inflation expectations and global economic conditions, while short-term interest rates are more affected by changes in the overnight rate. Therefore, the relationship between the overnight rate and long-term interest rates is not as direct or predictable as with short-term rates.

When the Bank of Canada Changes the Overnight Rate by a Certain