What are two reasons why the Fed does not have complete control over the level of bank deposits and loans?

Answer 1

both depend on consumers to put in money or take out loans, just making the option available doesnt cut it

Answer 2

I agree to the previous answer of velocity & inflation.

But it might be more specific to term them as consumer behaviour. Fed will never be able to control consumption by the individual consumer.

The individual consumer choose how much of income to consume and how much to deposit.(assuming that all unused income are deposited in the bank) This implicates the velocity of money, where by definition, the number of times money turns around/changes hands in the economy. And inflation also affects the consumer's willingness to consume. If the price of an egg increases by 100%, a large number of consumer will stop buying eggs, and inturn, this money will be deposited.

The same idea applies to loans.

The other reason will be supplier's behaviour in the sense that the Fed is unable to tell firms how much to produce and when to produce. And thus, how much to borrow and how much to invest.

And at a much more basic level, the Fed has no control over the economy's Demand & Supply.

It does have the ability to influence it thru interest rates and the goverment can influence it through public spending.

Answer 3

Velocity & Inflation