In practice, it is not possible for the Bank of Canada to control the money supply because

Question

Quizplus · Accepted Answer

The process of deposit creation by commercial banks is the primary driver of the money supply, and the Bank of Canada does not have direct control over this process. It can influence it through setting interest rates and providing liquidity to the banking system, but it cannot fully control it. A, B, and C are incorrect because the Bank of Canada does have some ability to control cash reserves, can predict to some extent the effects on the Canadian dollar, and does have legal authority to influence the money supply. E is incorrect because of the reasons stated above.

In Practice, It Is Not Possible for the Bank of Canada