The policy of the Bank of Canada from April 2009 to May 2010 implies that reserves are relevant for
A) the quantity of inside money but not outside money issued by the central bank.
B) fiscal policy in addition to monetary policy.
C) the quantity of outside money issued by the central bank.
D) a case of adequate financial liquidity.
E) aggregate supply.

Question

Quizplus · Accepted Answer

The policy of the Bank of Canada from April 2009 to May 2010 was focused on maintaining the quantity of outside money issued by the central bank, which includes the level of reserves held by banks. This was done through the use of open market operations and setting the target overnight interest rate. Therefore, reserves are relevant for the quantity of outside money issued by the central bank.

The Policy of the Bank of Canada from April 2009