What will the Bank of Canada do to expand the money supply?

Question

Quizplus · Accepted Answer

The Bank of Canada can expand the money supply by purchasing government securities, which puts more reserves in the hands of banks. This increases the amount of money that banks can lend out, thus expanding the money supply.

Option A is incorrect because ordering new Bank of Canada notes does not expand the money supply, it only replaces old or damaged notes.

Option B is incorrect because selling government securities reduces the money supply, as it takes money out of circulation.

Option D is incorrect because raising the bank rate reduces the money supply by making borrowing more expensive and decreasing the amount of money available for lending.

What Will the Bank of Canada Do to Expand the Money