Which of the following policy tools does the Bank of Canada use most frequently?
A) Changes to the discount rate
B) Changes to the reserve requirement
C) Changes to margin requirements
D) Open market operations

Question

Quizplus · Accepted Answer

The Bank of Canada most frequently uses open market operations as a policy tool. Open market operations involve the buying and selling of government securities on the open market in order to influence the level of reserves in the banking system and hence, the level of interest rates. The Bank of Canada may also use changes to the discount rate or reserve requirements, but these actions are less frequent and may have a smaller impact on the economy compared to open market operations. Margin requirements are not typically used by central banks as a policy tool.

Which of the Following Policy Tools Does the Bank of Canada