Which of the following best describes the outcomes of open-market purchases conducted by the Bank of Canada?
A)Bank reserves increase, and the money supply increases.
B)Bank reserves increase, and the money supply decreases.
C)The Bank of Canada borrows from member banks, which increases the money supply.
D)The Bank of Canada lends money to member banks, which decreases the money supply.

Question

Quizplus · Accepted Answer

Open-market purchases conducted by the Bank of Canada lead to an increase in bank reserves, as the bank purchases securities and pays for them with newly created reserves. These reserves are then available as funds for lending, leading to an increase in the money supply.

Which of the Following Best Describes the Outcomes of Open-Market