If the Bank of Canada conducts open market sales, 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

Open market sales involve the Bank of Canada selling government securities, which reduces the amount of reserves available for banks to lend out. This ultimately decreases the money supply, shifting the MP curve to the left.

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