When the inflation rate is 4 percent, the Bank of Canada will ________ bonds and the Canadian dollar will ________.

Question

Quizplus · Accepted Answer

When the inflation rate is higher, the Bank of Canada will sell bonds to decrease the money supply in the economy and reduce inflation. This decrease in the money supply will cause the Canadian dollar to appreciate (increase in value) as there is now less money to purchase goods and services.

When the Inflation Rate Is 4 Percent, the Bank of Canada