The Bank of Canada cannot target both the money supply and the interest rate because it does not control
A)bank reserves.
B)money demand.
C)the discount rate.
D)open market operations.
E)government spending.

Question

Quizplus · Accepted Answer

The Bank of Canada cannot target both the money supply and the interest rate because it does not control money demand. Money demand is determined by the actions and decisions of individuals and firms in the economy, and is influenced by factors such as inflation expectations and interest rates. Since the Bank of Canada does not have control over these factors, it cannot fully control the money demand and therefore cannot target both the money supply and the interest rate simultaneously.

The Bank of Canada Cannot Target Both the Money Supply