The Bank of Canada and the money supply

Suppose the money supply (measured by chequable deposits) is currently $550 billion. The required reserve ratio is 10%. Banks hold $55 billion in reserves, so there are no excess reserves.

The Bank of Canada wants to increase the money supply by $30 billion, to $580 billion. It could do this through open-market operations or changing the required reserve ratio. Assume for this question that you can use the simple money multiplier.

If the Bank of Canada wants to increase the money supply using open-market operations, it should

billionworth of Canadian government bonds.

If the Bank of Canada wants to increase the money supply by adjusting the required reserve ratio, it should the required reserve ratio.

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