If the Bank of Canada wants to increase the monetary base,it might:

Question

Quizplus · Accepted Answer

Engaging in an open-market purchase of Treasury bills is a common method used by central banks, such as the Bank of Canada, to increase the monetary base. This involves the central bank buying government securities from commercial banks, thereby injecting additional liquidity into the market and increasing the amount of cash in circulation. This increases the reserves held by commercial banks, which can lead to an increase in lending and ultimately stimulates economic growth.

B) Increasing the bank rate would actually reduce the monetary base as it would discourage borrowing and reduce the amount of money in circulation.
C) Increasing the reserve ratio would also reduce the monetary base as commercial banks would be required to hold more reserves, reducing the amount of money available for lending and circulation.
D) Decreasing personal income taxes may stimulate spending and economic growth but it would not directly impact the monetary base.

If the Bank of Canada Wants to Increase the Monetary