The central bank lending rate cannot be used to control the money supply with great precision because its effects on banks' demand for reserves are uncertain.

Question

Quizplus · Accepted Answer

The central bank lending rate influences the cost of borrowing for banks, which can affect their demand for reserves. However, the exact impact on the money supply is uncertain due to other factors like banks' lending behaviors, borrowers' demand for loans, and overall economic conditions, making precise control challenging.

The Central Bank Lending Rate Cannot Be Used to Control