There are two ways in which the Bank can provide additional reserves to the banking system: it can ________ government bonds or it can ________ advances to banks to commercial banks.

Question

Quizplus · Accepted Answer

The Bank of Canada can provide additional reserves to the banking system by either purchasing government bonds or extending advances to commercial banks. Selling government bonds or calling in advances would reduce reserves rather than increase them. Therefore, option C - Purchase; extend - is the correct answer.

There Are Two Ways in Which the Bank Can Provide