Suppose the Bank of Canada purchases government securities.Interest rates in Canada will ________, and the Canadian dollar will ________ against foreign currencies.

Question

Quizplus · Accepted Answer

When the Bank of Canada purchases government securities, it increases the money supply in the economy. With more money available, borrowers will be able to access credit at lower interest rates. This reduction in interest rates makes holding the Canadian dollar a less attractive option for foreign investors, leading to a depreciation of the currency.

Suppose the Bank of Canada Purchases Government Securities