If the Bank of Canada wanted to increase the money supply,it could _____ the required reserve ratio,_____,and _____ bonds on the open market.

Question

Quizplus · Accepted Answer

To increase the money supply, the Bank of Canada would need to decrease the required reserve ratio, which would allow banks to lend out more money. It would also need to decrease the overnight rate, which would encourage borrowing and spending. Finally, the Bank of Canada would need to buy bonds on the open market, which would inject more money into the economy. Choice B is the only option that includes both decreasing the required reserve ratio and decreasing the overnight rate, as well as buying bonds. Choices A, C, and D all include at least one incorrect action that would not lead to an increase in the money supply.

If the Bank of Canada Wanted to Increase the Money