If the Bank of Canada sells $500 000 worth of government bonds to a group of life insurance companies, and the companies pay for them by taking money out of their bank accounts, then:
A) chartered bank reserves will decrease by $500 000.
B) chartered-bank reserves will remain unchanged as the money will go into a Bank of Canada deposit.
C) the Bank of Canada will have increased the money supply.
D) chartered bank reserves will increase by $500 000.
Correct Answer:
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