During the financial crisis of 200 7-2008, the Bank of Canada took extraordinary actions to inject liquidity

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During the financial crisis of 200 7-2008, the Bank of Canada took extraordinary actions to inject liquidity into the banking system. As a result, the amount of reserves in the banking system increased significantly.

a. Why might the Bank choose to increase reserves in the banking system in such an economic environment?

b. Despite the large increase in reserves, there was not a large increase in the Canadian money supply. Can you provide an explanation?

c. Given your answer to part (b), would you predict that the Bank's actions would lead to more inflation? Explain why or why not.

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Macroeconomics

ISBN: 9780133910445

15th Edition

Authors: Christopher T S Ragan

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Question Posted: Mar 14, 2024 12:00 PM

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During the financial crisis of 200 7-2008, the Bank of Canada took extraordinary actions to inject liquidity

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Macroeconomics

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