The chairman of the Bank of Canada can accelerate economic activity by lowering interest rates. What primary method does the Bank of Canada use to accomplish this?

Question

Quizplus · Accepted Answer

The Bank of Canada can lower interest rates by using open market operations to increase the money supply. This involves purchasing government bonds from banks, which increases the amount of money they have available to lend out. This increased liquidity can lead to a decrease in interest rates, which can stimulate borrowing and economic activity. Increasing the discount rate, increasing reserve requirements, and selling margin requirements would all have the opposite effect, by reducing the money supply and increasing the cost of borrowing.

The Chairman of the Bank of Canada Can Accelerate Economic