To increase the monetary base,the Bank of Canada can:

Question

Quizplus · Accepted Answer

When the Bank of Canada conducts open-market purchases, it buys government securities from banks and other financial institutions, thereby increasing their reserves. This leads to an increase in the monetary base, as the banks can loan out more money, thereby increasing the money supply in the economy. On the other hand, conducting open-market sales (B) would decrease the monetary base, as the banks would have fewer reserves to lend out. Similarly, raising the required reserve ratio (C) would decrease the money supply, as banks would have to hold back more of their deposits as reserves, while lowering the required reserve ratio (D) would increase the money supply, but only if banks actually loaned out the extra reserves they would have. Overall, conducting open-market purchases is the most effective choice to increase the monetary base.

To Increase the Monetary Base,the Bank of Canada Can