Suppose the Bank of Canada Sells Government Securities to Banks

question 64

Multiple Choice

Suppose the Bank of Canada sells government securities to banks.Consequently, which of the following is likely to eventually increase?  

• A) the price level 
• B) planned investment expenditures 
• C) aggregate demand 
• D) interest rates

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Definitions:

Interest Expense

A cost incurred by an entity for borrowed funds, often reflected in the income statement as a non-operating expense.

Journal Entry

A record in accounting that notes the details of a financial transaction and its effect on accounts in a double-entry bookkeeping system.

Interest-bearing Note

An interest-bearing note is a debt instrument that promises to pay interest in addition to the principal amount borrowed.

Journal Entry

A record of a financial transaction in the accounting system that includes the accounts and amounts to be debited and credited.