If the Bank of Canada conducts open-market sales, how do the money supply and the aggregate demand change?
A) The money supply increases, and aggregate demand shifts right.
B) The money supply increases, and aggregate demand shifts left.
C) The money supply decreases, and aggregate demand shifts right.
D) The money supply decreases, and aggregate demand shifts left.

Question

Quizplus · Accepted Answer

When the Bank of Canada conducts open-market sales, it sells government securities to banks and the public. This results in a decrease in the amount of money available in the economy, leading to a decrease in the money supply. As a result, aggregate demand shifts left, as there is less money available for spending.

If the Bank of Canada Conducts Open-Market Sales, How Do