What happens when the cost of acquiring funds from the Bank of Canada is low?
A) Banks raise the interest rates they charge their customers.
B) Fewer businesses and individuals are willing to take out loans.
C) The economy slows and inflation is reduced.
D) Interest rates on bank loans tend to fall.

Question

Quizplus · Accepted Answer

When the cost of acquiring funds from the Bank of Canada is low, banks are able to borrow money at lower interest rates, which allows them to offer loans to their customers at lower interest rates as well. This tends to result in a decrease in interest rates on bank loans.

What Happens When the Cost of Acquiring Funds from the Bank