If the Bank of Canada Enters the Open Market and Purchases

Multiple Choice

If the Bank of Canada enters the open market and purchases $1000 of government securities, what will be the eventual change in the money supply given a 10 percent target reserve ratio in the commercial banking system?

A) decrease of $10 000
B) increase of $5000
C) decrease of $5000
D) decrease of $1000
E) increase of $10 000