How would the Bank of Canada use open market operations and the bank rate to increase the money supply?

Question

Quizplus · Accepted Answer

The Bank of Canada could use open market operations to increase the money supply by buying government bonds from commercial banks. This increases the reserves that these banks have, allowing them to lend out more money and therefore increasing the money supply. In addition, the Bank of Canada could reduce the bank rate, which would lower the cost of borrowing for commercial banks, encouraging them to lend out more money and again increasing the money supply. Selling bonds and increasing the bank rate would have the opposite effect, reducing the money supply.

How Would the Bank of Canada Use Open Market Operations