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:

Exercise Price

The price at which the holder of an option can buy (call option) or sell (put option) the underlying asset.

Time Value

The portion of an option's premium that is attributable to the amount of time remaining until the expiration of the option.

Call Option

An economic agreement granting the purchaser the choice, but not the duty, to acquire a stock, bond, commodity, or any asset at a previously determined price within a set period.

Call Option

A financial agreement that allows the purchaser the option, without the requirement, to purchase a stock, bond, commodity, or different asset at an agreed-upon price during a predetermined timeframe.