If the Bank of Canada is worried about inflation it will ________ the overnight rate to ________.

Question

Quizplus · Accepted Answer

If the Bank of Canada is worried about inflation, it will raise the overnight rate in order to decrease aggregate demand. When the overnight rate is raised, it becomes more expensive for individuals and businesses to borrow money, which can lead to a decrease in spending and ultimately reduce the overall demand for goods and services, thereby decreasing inflationary pressures. Lowering the overnight rate would have the opposite effect and increase aggregate demand, worsening inflation.

If the Bank of Canada Is Worried About Inflation It