As the sole issuer of Canadian money, the Bank of Canada can set any one of three variables:

Question

Quizplus · Accepted Answer

The Bank of Canada can set the monetary base (the amount of currency in circulation and deposits held at the central bank), the exchange rate (the value of Canadian currency relative to other currencies), and the short-term interest rate (the rate at which banks borrow money from the central bank). These three variables are all interrelated and can affect economic growth, inflation, and employment.

As the Sole Issuer of Canadian Money, the Bank of Canada