b) would the Bank of Canada do to tighten the monetary policy? Increase or decrease the policy rate? Explain. c) Assume that the settlement balances in the LVTS (the large

b)    would the Bank of Canada do to tighten the monetary policy? Increase or decrease the policy rate? Explain. c)    Assume that the settlement balances in the LVTS (the large value transfer system) are trading below the target overnight rate. How would Bank of Canada use its instruments — Open market operation (SPRA – Special Sale and Resale Agreement, SRAs -Sale and Repurchase Agreements, and Government deposit shifting) —, to influence the overnight rate in a manner that leaves aggregate settlement balances unchanged at the end of the day? You can use a hypothetical T-accounts to explain.

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