Suppose that currently the overnight loans rate is 4%, with the Bank of Canada's target range 4 to 4.25%. If the Bank reduces the target to 3.5 to 3.75%, which of the following helps explain why the actual rate will fall towards the new range? Select one: O a. Because institutions can now earn 3.75% from the Bank of Canada, they will not borrow from other institutions at 4%. O b. Because institutions can now borrow from the Bank of Canada at 3.75%, they will not borrow from thor banks at 4%.

Suppose that currently the overnight loans rate is 4%, with the Bank of Canada's target range 4 to 4.25%. If the Bank reduces the target to 3.5 to 3.75%, which of the following helps explain why the actual rate will fall towards the new range? Select one: O a. Because institutions can now earn 3.75% from the Bank of Canada, they will not borrow from other institutions at 4%. O b. Because institutions can now borrow from the Bank of Canada at 3.75%, they will not borrow from thor banks at 4%.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter25: Money, Banking, And The Federal Reserve System

Section: Chapter Questions

Problem 13P

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