If government deposits at the Bank of Canada are predicted to increase, the Bank will offset the transaction through government debt auctions to ________ settlement balances.

Question

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If government deposits at the Bank of Canada are predicted to increase, that means there will be an increase in settlement balances. To offset this increase, the Bank of Canada will conduct government debt auctions to increase the supply of government bonds and decrease the settlement balances. This is done to avoid excessive growth of the money supply and potential inflation.

If Government Deposits at the Bank of Canada Are Predicted