Exhibit 16-6 -If the Fed Is Targeting Interest Rates and Money Demand

question 59

Multiple Choice

Exhibit 16-6
-If the Fed is targeting interest rates and money demand shifts from D_m to D_m' in Exhibit 16-6, the Fed will

• A)do nothing and the interest rate will rise to i'
• B)do nothing and the interest rate will settle at i
• C)decrease the money supply to restore its target of i
• D)increase the money supply to restore its target of i
• E)decrease money demand back to D_m to restore its target of i

---

Definitions:

Parallelism

The use of components in a sentence that are grammatically the same, or similar in construction, sound, meaning, or meter.

Transportation Costs

Expenses associated with the movement of goods or individuals from one location to another, including fares, fuel, and maintenance.

Recreation Costs

Expenses associated with activities undertaken for enjoyment, relaxation, or leisure.

Collaborative Writing

The act of multiple individuals working together to produce a single document or piece of text.