Suppose that the Bank of Canada sells bonds to the chartered banks. Everything else held constant, this will cause the demand for Canadian assets to ________ and the Canadian dollar will ________.

Question

Quizplus · Accepted Answer

When the Bank of Canada sells bonds, it reduces the money supply, leading to higher interest rates. Higher interest rates increase the demand for Canadian assets, causing the Canadian dollar to appreciate.

Suppose That the Bank of Canada Sells Bonds to the Chartered