Suppose the Actual Overnight Interest Rate Is 3

Multiple Choice

Suppose the actual overnight interest rate is 3.5%.If the Bank of Canada raises its target for the overnight interest rate to 4%,and longer-term interest rates in the market rise as a result,

A) the demand for loans from commercial banks falls,the commercial banks sell government securities to the Bank of Canada,and the money supply falls.
B) the demand for loans from commercial banks rises,the commercial banks buy government securities from the Bank of Canada,and the money supply falls.
C) the demand for loans from commercial banks rises,the commercial banks sell government securities to the Bank of Canada,and the money supply rises.
D) the demand for loans from commercial banks falls,the commercial banks buy government securities from the Bank of Canada,and the money supply falls.
E) the demand for loans from commercial banks rises the commercial banks buy government securities from the Bank of Canada,and the money supply rises.