When the Bank of Canada Buys Government Bonds, How Do

Multiple Choice

When the Bank of Canada buys government bonds, how do the reserves of the banking system change and what happens to the money supply?

A) The reserves increase, so the money supply increases.
B) The reserves increase, so the money supply decreases.
C) The reserves decrease, so the money supply increases.
D) The reserves decrease, so the money supply decreases.