If the Bank of Canada were to raise the Bank rate,we would expect

Question

Quizplus · Accepted Answer

When the Bank of Canada raises the Bank rate, it becomes more expensive for banks to borrow money, which subsequently leads to a decrease in the money supply. As a result of this, the aggregate demand (AD) curve would shift to the left, as there would be less money available for individuals and businesses to spend on goods and services. Therefore, Option C is the correct choice. Option A is incorrect because there is an indirect effect on the money supply due to changes in interest rates. Option B is incorrect because increasing the money supply typically occurs through the use of lower interest rates, not higher ones. Option D is not a relevant choice as it does not provide a clear answer.

If the Bank of Canada Were to Raise the Bank