Suppose Bank of Canada sells government bonds to the banks and public.This will cause
A)the LM curve to shift up.
B)the IS curve to shift up.
C)the LM curve to shift down.
D)the IS curve to shift down.

Question

Quizplus · Accepted Answer

When the Bank of Canada sells government bonds, it reduces the money supply, causing interest rates to rise. This results in a decrease in investment and output, shifting the LM curve up.

Suppose Bank of Canada Sells Government Bonds to the Banks