Should the Fed only have the single goal of price stability? Why or why not?
What will be an ideal response?
Having only a single goal has advantages because the Fed would not be distracted by other concerns, it would have enhanced credibility, and it would help to keep the Fed free of political pressures. However it would also mean not being able to use monetary policy to stabilize the economy in the same way as it is used at present. It should be noted, however, that some economists would think that even that last point is an advantage.
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In the circular-flow diagram,
a. factors of production flow from government to firms. b. goods and services flow from households to firms. c. income paid to the factors of production flows from firms to households. d. spending on goods and services flows from firms to households.
The sale of government securities by the Fed
A) decreases the supply of money. B) increases the supply of money. C) decreases the demand for money. D) increases the demand for money.