Explain why the Fed must choose between targeting the money supply or targeting interest rates when money demand increases
If the money supply target is maintained when money demand increases, interest rates must rise; if an interest rate target is maintained when money demand increases, the money supply must increase. Targeting the money supply is therefore inconsistent with targeting interest rates.
Economics
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The most common definition that monetary policymakers use for price stability is
A) low and stable deflation. B) an inflation rate of zero percent. C) high and stable inflation. D) low and stable inflation.
Economics
The largest portion of the M1 money supply consists of
A. coins in circulation. B. paper currency in circulation. C. savings deposits at credit unions. D. checkable deposits.
Economics