How Does the Fed Decide Which Monetary Measure Should Be

question 187

Multiple Choice

How does the Fed decide which monetary measure should be the focus of its monetary policy choices?

• A) The Fed would like to track a monetary measure that is most closely related to the market interest rate.
• B) The Fed would like to track a monetary measure that is most closely related to the quantity of money demanded by economic agents.
• C) The Fed would like to track a monetary measure that is most closely related to the level of real GDP and the price level.
• D) The Fed would like to track a monetary measure that is most closely related to government spending.

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Definitions:

Income

The amount of money received over a period of time, usually from work or investments.

Slope

A measure of the steepness or incline of a line, typically expressed as a ratio of vertical change to horizontal change.

Monthly Income

The total amount of income earned or received by an individual or household within a month.

Quantities

Amounts or volumes of a product, substance, or item, usually measured or counted.