In an Open Market Operation Aimed at Increasing Expenditure, the Bank

question 97

Multiple Choice

In an open market operation aimed at increasing expenditure, the Bank of Canada

• A)sells government bonds, decreasing bank reserves, decreasing lending, decreasing the overnight rate.
• B)sells government bonds, decreasing bank reserves, decreasing lending, increasing the overnight rate.
• C)sells government bonds, decreasing bank reserves, increasing lending, increasing the overnight rate.
• D)buys government bonds, increasing bank reserves, increasing lending, decreasing the overnight rate.
• E)buys government bonds, increasing bank reserves, increasing lending, increasing the overnight rate.

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Definitions:

Store of Value

An asset that can be saved, retrieved, and exchanged at a later time, and predictably will be able to purchase goods or services equivalent to its current value.

M1 Money Supply

This term describes a category of the money supply that includes all physical money like coins and currency, as well as demand deposits and other liquid assets held by the central bank.

Checkable Deposits

Bank accounts that allow the account holder to write checks or use electronic debit to access funds, including both checking and demand deposit accounts.

Federal Reserve Notes

The physical banknotes issued by the Federal Reserve, serving as the national currency of the United States.