Discuss Why the Fed Can Either Select a Quantity or a Price

question 29

Essay

Discuss why the Fed can either select a quantity or a price (interest rate) target but not both.If it helps, you can use the market for reserves for an example.

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Definitions:

Punishment

A process where an undesired behavior is followed by a consequence, typically reducing the likelihood of that behavior occurring again.

Conditioned Association

The process by which two stimuli or events are linked together in the mind to produce a learned response.

Neutral

Not favoring any side in a dispute, contest, or situation; unbiased or impartial.

Unconditioned Stimulus

A stimulus that naturally triggers a response without any need for prior learning.