What Is the Primary Way the Bank of Canada Controls

question 117

Multiple Choice

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

---

Definitions:

Capital Structure

Refers to how a firm finances its overall activities and growth through different sources of funds, such as debt and equity.

M&M Proposition I

A theory stating that, in a perfect market, the value of a firm is unaffected by how it is financed, regardless of the debt-to-equity ratio.

Capital Structure

Refers to the way a corporation finances its assets through a combination of equity, debt, or hybrid securities.

M&M Proposition I

Modigliani and Miller's principle suggesting the irrelevance of financial leverage on a company's valuation in an ideal market.