If the Bank of Canada sells a government bond to a member of the public,what impact does this have on the banking system reserves and the money supply?

Question

Quizplus · Accepted Answer

When the Bank of Canada sells a government bond to a member of the public, the purchaser pays with money from their bank account, which reduces the bank's reserves. As a result, the banking system has fewer reserves, and the money supply tends to fall as banks have less money to lend out.

If the Bank of Canada Sells a Government Bond to a Member