Which statement best describes the effects of an open-market operation undertaken by the Bank of Canada?
A) If the Bank of Canada purchases bonds in the open market, then the money supply shifts right and the price level increases.
B) If the Bank of Canada sells bonds in the open market, then the money supply shifts right and the price level decreases.
C) If the Bank of Canada purchases bonds in the open market, then the money supply shifts left and the price level decreases.
D) If the Bank of Canada sells bonds in the open market, then the money supply shifts left and the price level increases.

Question

Quizplus · Accepted Answer

When the Bank of Canada purchases bonds, it injects money into the economy, increasing the money supply and potentially raising the price level.

Which Statement Best Describes the Effects of an Open-Market Operation