Which of the following statements correctly describes an anti-inflationary monetary policy?
A)"The Bank of Canada's recent purchases of government securities is stimulating the housing sector."
B)"The Bank of Canada's recent moves to lower interest rates are behind the recent decreases in the value of the Canadian dollar."
C)"The Bank of Canada's recent moves to increase the overnight loans rate are leading to less lending and less consumer spending."
D)"The Bank of Canada's recent sales of government securities are stimulating the housing sector."
E)"The Bank of Canada's recent moves to decrease the value of the Canadian dollar are leading to more spending in the economy."

Question

Quizplus · Accepted Answer

An anti-inflationary monetary policy is one that aims to reduce the rate at which prices are rising in the economy. The Bank of Canada can pursue this policy by increasing the interest rates that it charges commercial banks for overnight loans. When the cost of borrowing increases, lenders become more reluctant to provide loans and borrowers become more cautious about their spending. This reduces the overall level of economic activity and can help to prevent prices from rising too quickly. Option A, D, and E do not describe anti-inflationary policies, while option B suggests that the Bank of Canada is pursuing an expansionary monetary policy, which would not be anti-inflationary.

Which of the Following Statements Correctly Describes an Anti-Inflationary Monetary