When the Bank of Canada buys government securities, it adds to the supply of money and credit, which causes a reduction in interest rates.

Question

Quizplus · Accepted Answer

When the Bank of Canada buys government securities, it increases the money supply in the economy. This increase in supply lowers the price of money, which is the interest rate. Therefore, it can be said that the purchase of government securities by the bank causes a reduction in interest rates.

When the Bank of Canada Buys Government Securities, It Adds