28. One reason the Bank of Canada does not try to influence the money supply directly is that the slope of the money demand curve is not precisely known, and so the effect on the interest rate of a change in money supply is uncertain. because the investment demand curve is almost vertical, any change in the interest rate resulting from a change in money supply would have little or no effect on desired investment expenditure. the Bank of Canada has many other policy tools with which it can influence aggregate demand. because the money demand curve is almost horizontal, changes in the money supply would have little or no effect on the interest rate. the Bank of Canada does not have the mandate to change the money supply.

When a central bank changes the money supply, it changes interest rates, and changes in interest…

Answered: . One reason the Bank of Canada does…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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28. One reason the Bank of Canada does not try to influence the money supply directly is that

		the slope of the money demand curve is not precisely known, and so the effect on the interest rate of a change in money supply is uncertain.
		because the investment demand curve is almost vertical, any change in the interest rate resulting from a change in money supply would have little or no effect on desired investment expenditure.
		the Bank of Canada has many other policy tools with which it can influence aggregate demand.
		because the money demand curve is almost horizontal, changes in the money supply would have little or no effect on the interest rate.
		the Bank of Canada does not have the mandate to change the money supply.

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