In terms of the aggregate demand and aggregate supply model,the sale of bonds by the Bank of Canada to chartered banks will:
A)increase aggregate supply
B)decrease aggregate supply
C)increase aggregate demand
D)decrease aggregate demand
E)increase both aggregate demand and aggregate supply

Question

Quizplus · Accepted Answer

Selling bonds by the Bank of Canada to chartered banks will decrease the money supply in the economy. This will lead to a decrease in aggregate demand in the economy. As a result, the prices of goods and services will fall due to reduced purchasing power. Therefore, the correct answer is D, i.e., decrease aggregate demand.

In Terms of the Aggregate Demand and Aggregate Supply Model,the