In an open market operation aimed at increasing expenditure, the Bank of Canada
A)sells government securities, decreasing bank reserves, increasing lending, increasing the overnight rate.
B)sells government securities, decreasing bank reserves, decreasing lending, decreasing the overnight rate.
C)buys government securities, increasing bank reserves, increasing lending, increasing the overnight rate.
D)sells government securities, decreasing bank reserves, decreasing lending, increasing the overnight rate.
E)buys government securities, increasing bank reserves, increasing lending, decreasing the overnight rate.

Question

Quizplus · Accepted Answer

In an open market operation aimed at increasing expenditure, the Bank of Canada would buy government securities. This action increases bank reserves, which in turn increases lending. Increased lending typically leads to a decrease in the overnight rate, as there is more money available for banks to lend out.

In an Open Market Operation Aimed at Increasing Expenditure, the Bank