The tool of monetary policy with which the Bank of Canada buys and sells government bonds is called:

Question

Quizplus · Accepted Answer

Open-market operations refer to the buying and selling of government securities in the open market by the central bank to control the money supply and interest rates. When the Bank of Canada buys government bonds, it increases the money supply in the economy, leading to lower interest rates and increased investment and consumption. Conversely, when it sells government bonds, it decreases the money supply, leading to higher interest rates and reduced investment and consumption. Deposit switching and reserve requirements are other tools of monetary policy, but they do not involve buying and selling government bonds. The bank rate is the interest rate at which the central bank lends money to commercial banks, which is another tool of monetary policy but not the one used for buying and selling government bonds.

The Tool of Monetary Policy with Which the Bank of Canada