Which of the following would constitute an expansionary monetary policy by the Bank of Canada? A....
Which of the following would constitute an expansionary monetary policy by the Bank of Canada?
| A. |
an open market sale of government securities |
|
| B. |
moral suasion to increase the commercial banks' target reserve ratio |
|
| C. |
none of these answers would be expansionary |
|
| D. |
a reduction of the Bank's target for the overnight interest rate |
|
| E. |
moral suasion to reduce lending by commercial banks |
Homework Answers
Only option D with overnight interest rate reduction will lead to expansionary monetary policy as this will make loans cheaper and spurts demand.
Fed selling securities will reduce money for commercial banks to lend,reserve ratio increase will also leave bank with lesser money to lend so all other are contractionary monetary policy Hence, Option D is correct
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Which of the following would constitute an expansionary monetary
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