If the Bank of Canada sells government securities to the public, which of the following transactions take place?
A)The demand deposits of chartered banks are unchanged, but their reserves increase.
B)The demand deposits and reserves of chartered banks both decrease.
C)The demand deposits of chartered banks are unchanged, but their reserves decrease.
D)The demand deposits and reserves of chartered banks are both unchanged.

Question

Quizplus · Accepted Answer

When the Bank of Canada sells government securities to the public, the public pays for these securities by withdrawing funds from their bank accounts, leading to a decrease in demand deposits and reserves of chartered banks.

If the Bank of Canada Sells Government Securities to the Public