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If the Bank of Canada Chooses to Expand M2 by Exactly

Question 4

Multiple Choice

If the Bank of Canada chooses to expand M2 by exactly $1 million,it could do so by


A) buying $1 million worth of government securities on the open market.
B) selling $1 million worth of government securities on the open market.
C) increasing reserves at the commercial banks by $1 million.
D) decreasing reserves at the commercial banks by $1 million.
E) None of the above - the Bank of Canada cannot precisely control the money supply.

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