All else equal, when the Bank of Canada engages in a restrictive monetary policy, the price of government securities tends to:
A)fall.
B)rise.
C)remain constant.
D)move in the same direction as the bonds' interest rate yield.

Question

Quizplus · Accepted Answer

When the Bank of Canada engages in a restrictive monetary policy, it reduces the money supply in the economy which causes interest rates to rise. As interest rates rise, demand for government securities decreases, causing their price to fall.

All Else Equal, When the Bank of Canada Engages in a Restrictive