Which Statement Best Describes the Outcomes of Open-Market Purchases Conducted

question 95

Multiple Choice

Which statement 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.

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Definitions:

Constant

A value that does not change in mathematical expressions or economic models, acting as a fixed point of reference.

Diminishing

A principle indicating that as more of a good or service is consumed, the marginal benefit to the consumer decreases.

Behavioral Economics

A field of economic research that examines the effects of psychological, cognitive, emotional, cultural, and social factors on economic decisions.

Rational

In economics, refers to individuals making decisions that will provide them with the greatest benefit or satisfaction given their limited resources.