Some Economists Argue That the Fed Should Commit to Keeping $\vec { M }$

question 107

Multiple Choice

Some economists argue that the Fed should commit to keeping $\vec { M }$ + $\vec { v }$
Fixed at a particular value, say 5%. How would this rule require the Fed to respond in the event of a negative spending shock? A negative real shock?

• A) increase \(\vec{ M }\)
• ; do nothing
• B) increase \(\vec { M }\)
• ; increase \(\vec { M }\)
• C) increase \(\vec{ M }\)
• ; decrease \(\vec { M }\)
• D) decrease \(\vec{ M }\)
• ; increase \(\vec { M }\)

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Definitions:

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price level.

Price of Oil

The cost per barrel of crude oil as determined by global markets and supply-demand dynamics.

Quantity of Oil

The total volume or amount of oil available or in production at a given time.

Complements

Products or services that complement each other, such that a rise in the demand for one results in a rise in the demand for its counterpart.