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In order to support the canadian dollar suppose the bank of

In order to support the Canadian dollar, suppose the Bank of Canada buys an amount of Euros from some major commercial Canadian banks (a type of operation the Bank of Canada rarely undertakes).

a. What is the immediate and the longer-term impact of this operation on the money supply?

b. If the Bank of Canada does not wish that the currency swap influence the money supply, what does it have to do?

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