Suppose the Money Demand Curve Shifts Rightward

question 46

Multiple Choice

Suppose the money demand curve shifts rightward.Which of the following is true about the Fed's options?

• A)The Fed can keep the interest rate from rising only if it increases the money supply.
• B)The Fed cannot prevent the interest rate from rising.
• C)The Fed can prevent the interest rate from rising without changing the money supply.
• D)If the Fed expands the money supply,the interest rate will rise even further.
• E)The Fed should reduce the money supply if it wishes to prevent the interest rate from rising.