Using an Interest Rate for an Intermediate Target

question 1

Multiple Choice

Using an interest rate for an intermediate target

• A)will cause the quantity of money to fluctuate.
• B)will often lead to a recession.
• C)requires the use of a monetary aggregate as an operating target.
• D)is required by the Federal Reserve Act.

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Definitions:

Shortage

A situation where the demand for a product exceeds its supply, often leading to higher prices.

Surplus

The condition that occurs when the quantity of a good or service supplied exceeds the quantity demanded, often leading to lower prices.

Interest Rates

The sum charged by a lender, presented as a percentage of the principal, for a borrower’s access to assets.

Supply Of Money

The total amount of monetary assets available in an economy at a specific time, including cash, bank deposits, and liquid financial assets.