The Fed Prefers to Focus on the Interest Rate Rather

question 94

Multiple Choice

The Fed prefers to focus on the interest rate rather than growth in the money supply because

• A)it does not like to conduct open market operations.
• B)the money supply is too unpredictable.
• C)it makes inflation more predictable.
• D)money demand is too volatile.
• E)it is easier to fix the interest rate than maintain growth in the money supply.

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Definitions:

Adjusted Trial Balance

A list of all accounts and their balances after adjusting entries have been made, used as the basis for preparing financial statements.