If the Bank of Canada chooses to expand the money supply directly,it could

Question

Quizplus · Accepted Answer

The Bank of Canada can expand the money supply directly by buying government securities on the open market. This injection of funds into the financial system increases the amount of money available for lending and spending, which can stimulate economic activity. Selling government securities on the open market or reducing its deposits at commercial banks would have the opposite effect of contracting the money supply. Selling foreign currency assets would also not directly impact the money supply. Changing the price level is a result of changes in the money supply and not a direct action the Bank of Canada can take to expand it.

If the Bank of Canada Chooses to Expand the Money