The money supply declines from $3 billion to $2 billion. The money supply contraction is...?

Question

On the graph above, the money supply declines from $3 billion to $2 billion. The money supply contraction is consistent with which of the following actions by the Bank of Canada?

A. Selling government bonds on the open market

B. Buying government bonds on the open market

C. Reducing the reserve requirement

D. Reducing the bank rate

Answer 1

A. Selling government bonds on the open market

Answer 2

A, selling bonds means they're taking money in

Answer 3

b. if you buy goverment bonds you reduce your available money supply from 3 billion to 2 billion. -blurey

Answer 4

Dana is right.  The answer is A.

A results in the government receiving money from the public which contracts the money supply

B result in the government paying out money to the public which expands the money supply

C results in the banks lending more money thus expanding the money supply

D...what is the bank rate?