When the Bank of Canada buys bonds, chartered bank reserves increase and banks can increase lending.

Name: When the Bank of Canada buys bonds, chartered bank reserves increase and banks can increase lending.
Brand: Quizplus
Rating: 4.9 (50 reviews)

Question

Quizplus · Accepted Answer

When the Bank of Canada buys bonds, they pay for them with funds from their own account, which increases the deposits of the seller's bank. This in turn increases the reserves held by the seller's bank, and allows them to lend more money.

When the Bank of Canada Buys Bonds, Chartered Bank Reserves