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

Question

Quizplus · Accepted Answer

When the Bank of Canada buys government securities on the open market, it gives cash to the public in exchange for the securities. This increases the money supply directly, as individuals and institutions deposit the cash into their bank accounts, which increases the reserves held by commercial banks, thereby allowing them to create more loans and expand the money supply.

If the Bank of Canada Chooses to Expand the Money