What Actions Could the Federal Reserve Take to Achieve Consistent

question 73

Multiple Choice

What actions could the Federal Reserve take to achieve consistent growth in real GDP at 4 percent per year?

• A)The Fed could increase in the growth rate of the money supply by 1% each year until the inflation rate was exactly equal to 4 percent.
• B)The Fed could maintain a growth rate of the money supply of 4 percent,regardless of whether inflation was rising or falling in the economy.
• C)The Fed could follow contractionary monetary policy that would reduce the federal funds rate to zero so investment will rise consistently.
• D)The Fed has no direct control over real GDP in the long run,so there are no actions it could take to achieve that goal.

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Definitions:

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