Which statement best describes the impact of open-market purchases by the Bank of Canada?
A) The money supply and the value of money increase.
B) The money supply increases, which makes the value of money decrease.
C) The money supply and the value of money decrease.
D) The money supply decreases, which makes the value of money increase.

Question

Quizplus · Accepted Answer

When the Bank of Canada conducts open-market purchases, it buys government securities from the public, which increases the amount of money in the economy. As the money supply increases, the value of money tends to decrease due to inflationary pressures, making each unit of currency worth less in terms of purchasing power.

Which Statement Best Describes the Impact of Open-Market Purchases by the Bank