How may the Bank of Canada influence the price level?
A) by conducting open-market sales and raising the bank rate
B) by conducting open-market sales and lowering the bank rate
C) by conducting open-market purchases and raising the bank rate
D) by conducting open-market purchases and lowering the bank rate

Question

Quizplus · Accepted Answer

The Bank of Canada can influence the price level by conducting open-market purchases, which involves buying government securities to increase the money supply and lower interest rates. This stimulates spending and economic growth, which can raise prices. Additionally, the Bank of Canada can lower the bank rate, which makes borrowing cheaper and encourages spending, leading to an increase in prices.

How May the Bank of Canada Influence the Price Level