If the Bank of Canada conducts open market purchases, the money supply ________, shifting the MP curve to the ________, everything else held constant.
A) decreases; right
B) decreases; left
C) increases; right
D) increases; left

Question

Quizplus · Accepted Answer

When the Bank of Canada conducts open market purchases, it buys securities from the public, which increases the reserves of the banking system, thereby increasing the money supply. This action shifts the monetary policy (MP) curve to the right, indicating an easier monetary policy stance.

If the Bank of Canada Conducts Open Market Purchases, the Money