In General,if a Central Bank Chooses to Target the Interest

question 12

Multiple Choice

In general,if a central bank chooses to target the interest rate in its implementation of monetary policy,then

• A)it is more difficult to communicate this policy to the public than a change in money supply.
• B)the central bank can more easily control the process of deposit creation by the commercial banks.
• C)the money supply is determined by the Minister of Finance.
• D)the implementation of policy is more straightforward because the central bank knows precisely the slope and position of the money demand curve.
• E)it conducts the necessary open-market operations to accommodate the resulting change in money demand.

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Definitions:

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