When the Bank of Canada buys bonds, interest rates

Question

Quizplus · Accepted Answer

When the Bank of Canada buys bonds, it injects money into the economy and increases the money supply. This leads to a decrease in interest rates, which incentivizes businesses to invest more, leading to an increase in business investment. However, the increase in the money supply also leads to a decrease in the value of the Canadian dollar, resulting in a depreciation of the currency. Therefore, the correct answer choice is D.

When the Bank of Canada Buys Bonds, Interest Rates