Which statement best describes the process of open-market purchases conducted by the Bank of Canada?
A) The Bank of Canada buys Treasury bills, which increases the money supply.
B) The Bank of Canada buys Treasury bills, which decreases the money supply.
C) The Bank of Canada borrows from member banks, which increases the money supply.
D) The Bank of Canada lends money to member banks, which decreases the money supply.

Question

Quizplus · Accepted Answer

Open-market purchases involve the Bank of Canada buying government securities, such as Treasury bills, from banks and other financial institutions. This increases the amount of money in circulation in the economy and is therefore expansionary monetary policy.

Which Statement Best Describes the Process of Open-Market Purchases Conducted