To decrease the money supply, the Bank of Canada could

Question

Quizplus · Accepted Answer

Entering into a sale and repurchase agreement involves the Bank of Canada selling government securities to commercial banks with an agreement to repurchase them at a later date. This would decrease the money supply as commercial banks would have less funds available to lend out, ultimately reducing the amount of money in circulation. Lowering the bank rate or increasing transfer payments would have the opposite effect and increase the money supply. Raising income taxes would not directly affect the money supply, and lowering the desired reserve ratio would increase the money supply.

To Decrease the Money Supply, the Bank of Canada Could