If the Bank of Canada purchases government bonds on the open market, then we would expect all of the following to occur except:

Question

Quizplus · Accepted Answer

When the Bank of Canada purchases government bonds on the open market, it injects liquidity into the banking system, increasing commercial banks' excess reserves (B), which can lead to an increase in the volume of loans (C) and an expansion of bank deposits (D). This action is typically aimed at lowering interest rates, not increasing the bank rate (A), which contradicts the expected outcome of such a monetary policy action.

If the Bank of Canada Purchases Government Bonds on the Open