What action should the Bank of Canada take if inflation is persistently below 2% and is decreasing? O sell securities O lower the target for the overnight lending rate increase the chartered banks reserve ratio increase the bank rate

Economics Nov 28, 2020

Expert Solution

If inflation is persistently below 2% and is decreasing then central bank has to increase money supply in the economy as too low inflation is also bad fir the economy .

So increasimg money supply means central bank has to adopt expansionary monetary policy.

Selling securities, increasing bank rate and increasing CRR are measures used to decrease money supply that is to adopt contractionary monetary policy

option B that is lower the target for the overnight lending rate is correct answer

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