Other things remaining constant, the sale of securities on the open market by the Bank of Canada would eventually lead to:

Question

Quizplus · Accepted Answer

When the Bank of Canada sells securities on the open market, it effectively reduces the amount of money in the banking system. This reduction in the money supply tends to increase interest rates because there is less money available for lending. Higher interest rates make borrowing more expensive, which can lead to a decrease in investment spending. Therefore, the correct answer is an increase in the real interest rate.

Other Things Remaining Constant, the Sale of Securities on the Open