When the Bank of Canada buys government securities, this reduces the money supply because the government has spent some of its money and therefore has less to spend.

Question

Quizplus · Accepted Answer

When the Bank of Canada buys government securities, it is actually increasing the money supply as it is injecting money into the economy. This is because the Bank of Canada pays for these securities with newly created money, which increases the overall money supply in the economy.

When the Bank of Canada Buys Government Securities, This Reduces