To have an independent monetary policy and target inflation, the Bank of Canada must allow the Canadian Dollar to float.

Question

Quizplus · Accepted Answer

Allowing the Canadian Dollar to float means that its value is determined by market forces of supply and demand, which enables the Bank of Canada to adjust interest rates and money supply to achieve its inflation targets. This flexibility would not be possible if the Canadian Dollar was pegged to another currency or fixed to a specific value.

To Have an Independent Monetary Policy and Target Inflation, the Bank