Suppose The Bank of Canada (BOC) recently decided to increase the money supply using openmarket operations. During a press conference, a reporter asks the governor of the bank to explain what openmarket operations are and how the BOC will use them to increase the moneysupply.

How will the governor of the bankreply?

a)-Openmarket operations occur when a central bank purchases or sells government securities. The central bank increases the money supply by purchasing securities and reduces the money supply by selling securities. Openmarket operations work by changing the amount of excess reserves available in the bankingsystem.

b)-Openmarket operations occur when a central bank purchases or sells government securities. To increase the money supply, the central bank sells government securities, which increases the amount of reserves in the banking system and fuels depositexpansion.

c)-Openmarket operations refer to manipulating the interest rate at which the BOC loans to member banks. Increasing the money supply occurs when the BOC increases this rate, which decreases the amount of required reserves in the bankingsystem.

d)-Openmarket operations increase or decrease the reserve requirement. The money supply will increase when openmarket operations are used to decrease the reserverequirement.