Which of the following best describes the effects of an open-market operation undertaken by the Bank of Canada?
A)If the Bank of Canada purchases bonds in the open market, then the money supply shifts right and the price level increases.
B)If the Bank of Canada sells bonds in the open market, then the money supply shifts right and the price level decreases.
C)If the Bank of Canada purchases bonds in the open market, then the money supply shifts left and the price level decreases.
D)If the Bank of Canada sells bonds in the open market, then the money supply shifts left and the price level increases.

Question

Quizplus · Accepted Answer

When the Bank of Canada purchases bonds in the open market, it increases the money supply, which can lead to an increase in the price level due to more money being available in the economy.

Which of the Following Best Describes the Effects of an Open-Market