Using the money demand and money supply model, an open market sale of government of Canada securities by the Bank of Canada would cause the equilibrium interest rate to

Question

Quizplus · Accepted Answer

An open market sale of government of Canada securities by the Bank of Canada would decrease the money supply in the economy. With a decrease in the money supply, the money demand curve would remain the same. As a result, the equilibrium interest rate would increase to balance the money demand and supply. Therefore, the correct answer is A) increase.

Using the Money Demand and Money Supply Model, an Open