If the Bank of Canada wants to increase the overnight lending rate using open-market operations, it...

Question

Question

If the Bank of Canada wants to increase the overnight lending rate using open-market operations, it should _____________ bonds.

a) sell

b) buy

Answer 1

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Answer #1

Option A

The lending rate refers to the interest rate charged by the banks to other depository institutions or individuals for overnight loans.
If the bank of Canada wants to increase the lending rate, it must sell bonds in the open market.
This will increase the cost of borrowing. as a result money supply and the inflation rate decreases.

Answer 2

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