The Bank of Canada will engage in a repurchase agreement when it wants to ________ reserves ________ in the banking system.

Question

Quizplus · Accepted Answer

A repurchase agreement, also known as a repo, is a short-term transaction where the Bank of Canada purchases government securities from commercial banks, with the agreement to sell them back at a later date. This injects temporary liquidity into the banking system, increasing reserves available for lending. Therefore, the correct answer is B) increase; temporarily.

The Bank of Canada Will Engage in a Repurchase Agreement