Question

Think of a time when the economy was very strong for several years and business was booming. during that time, however, prices began to increase and there was fear that the increase might continue for an extended period. which of the following actions could the bank of canada have taken to counteract the increasing prices?

a. raise the overnight rate lower the reserve
b. requirement buy government
c. bonds increase
d. the overall supply of money

Answer 1

The Bank of Canada could counteract increasing prices by raising the overnight rate, lowering the reserve requirement, and buying government bonds.

Step-by-step explanation:

The Bank of Canada could have taken the following action to counteract the increasing prices:

1. Raise the overnight rate: By increasing the interest rate on loans, the Bank of Canada can discourage borrowing and reduce spending. This can help slow down the rate of price increases.
2. Lower the reserve requirement: By reducing the amount of money that banks are required to hold in reserve, more money is available for lending and circulating in the economy, which can help stimulate economic growth and reduce price increases.
3. Buy government bonds: When the Bank of Canada buys government bonds, it increases the money supply in the economy. This can help lower interest rates and stimulate borrowing and spending, which can counteract increasing prices.