Which of the following is an appropriate policy for the Bank of Canada to pursue if it wants to increase the money supply?

Question

Quizplus · Accepted Answer

Purchase and resale agreements involve the central bank buying government securities from commercial banks, increasing the banks' reserves and allowing them to lend out more money, thus increasing the money supply. Sale and repurchase agreements also involve buying and selling government securities, but they are used to reduce the money supply. Raising the reserve requirement and the overnight interest rate both reduce the money supply, and lowering taxes is a fiscal policy tool that is not directly controlled by the central bank.

Which of the Following Is an Appropriate Policy for the Bank