What is the primary way the Bank of Canada controls the supply of money?
A) by buying and selling government securities on the open market
B) by establishing the amount of currency the Bank of Canada is allowed to print each month
C) by allowing banks to borrow more money from the Bank of Canada
D) by changing the reserve requirement

Question

Quizplus · Accepted Answer

The primary way the Bank of Canada controls the supply of money is by buying and selling government securities on the open market, which affects the amount of money in circulation and thus influences interest rates and inflation.

Answer: D 
 Changing the reserve requirement, or the amount of reserves banks are required to hold, can also impact the supply of money, but it is not the primary way the Bank of Canada controls it.

Answer: B and C 
 Establishing the amount of currency the Bank of Canada is allowed to print each month and allowing banks to borrow more money from the Bank of Canada may be factors in controlling the supply of money, but they are not commonly used methods and are not the primary way the Bank of Canada controls it.

What Is the Primary Way the Bank of Canada Controls