The Bank of Canada raised interest rates in 1999 and 2000.By doing this,what did the Bank of Canada do to the money supply and why?
A) It increased the money supply because it was concerned about unemployment.
B) It increased the money supply because it was concerned about inflation.
C) It decreased the money supply because it was concerned about unemployment.
D) It decreased the money supply because it was concerned about inflation.

Question

Quizplus · Accepted Answer

The Bank of Canada raising interest rates in 1999 and 2000 resulted in decreasing the money supply. This is because higher interest rates make borrowing more expensive, which in turn leads to a decrease in spending and investment. This decrease in spending and investment ultimately results in a decrease in demand for goods and services, which helps to combat inflation. Therefore, the Bank of Canada raised interest rates to decrease the money supply and combat inflation.

The Bank of Canada Raised Interest Rates in 1999 and 2000.By