If the Fed Wanted to Prevent a Change in Money

question 130

Multiple Choice

If the Fed wanted to prevent a change in money demand from affecting real GDP,which of the following rules would be feasible and allow the Fed to attain its goal?

• A) Keep government spending constant
• B) Keep the money supply constant
• C) Keep money demand constant
• D) Keep taxes constant
• E) Keep the interest rate constant.

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Definitions:

Solvent

The state of having assets in excess of liabilities, enabling a company or individual to meet its financial obligations.

Nonprofit Corporations

Organizations that operate for charitable, educational, cultural, or public service purposes rather than for profit, often enjoying tax-exempt status.

Private Foundations

Non-profit organizations usually created via a single primary donation from an individual or business and whose funds and program operations are managed by its own trustees or directors.

Government Intervention

Actions taken by a government to affect the economy or society, which can include regulations, subsidies, tariffs, and direct spending.