Which of the Following Best Describes the Effects of an Open-Market

question 127

Multiple Choice

Which of the following best describes the effects of an open-market operation undertaken by the Bank of Canada?

• A)If the Bank of Canada purchases bonds in the open market, then the money supply shifts right and the price level increases.
• B)If the Bank of Canada sells bonds in the open market, then the money supply shifts right and the price level decreases.
• C)If the Bank of Canada purchases bonds in the open market, then the money supply shifts left and the price level decreases.
• D)If the Bank of Canada sells bonds in the open market, then the money supply shifts left and the price level increases.

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Definitions:

Petty Cash Fund

A small amount of cash on hand used for paying minor expenses.

Cash Over and Short

An account used to record the discrepancies between the expected and actual amount of cash, reflecting either excess (over) or deficiency (short).

Petty Cash Fund

A small amount of cash kept on hand used for paying minor expenses, managed through an imprest system to simplify tracking of petty transactions.

Cash Account

An account that records all transactions involving cash inflows and outflows.