Which of the following actions would have the effect of increasing the supply of money and credit and lowering interest rates?
A) the Bank of Canada buying government securities
B) the Bank of Canada raising the margin requirement
C) the Bank of Canada raising the reserve requirement
D) the Bank of Canada raising the discount rate

Question

Quizplus · Accepted Answer

When the Bank of Canada buys government securities, it injects money into the economy, increasing the supply of money and credit. This increases competition among lenders and reduces interest rates.

B) When the Bank of Canada raises the margin requirement, it makes it more difficult for investors to borrow money to purchase securities, which reduces the supply of money and credit and increases interest rates.

C) When the Bank of Canada raises the reserve requirement, it requires banks to hold more money in reserve and reduces the supply of money and credit in the economy, increasing interest rates.

D) When the Bank of Canada raises the discount rate, it makes it more expensive for banks to borrow money from the central bank, which reduces the supply of money and credit in the economy, increasing interest rates.

Which of the Following Actions Would Have the Effect of Increasing