Interest Rate Targeting May Be Problematic When

question 2

Multiple Choice

Interest rate targeting may be problematic when

• A) the central bank cannot distinguish shocks to money supply from shocks to money demand.
• B) there is a large fraction of borrowers in the economy.
• C) the central bank cannot distinguish shocks to money demand from shocks to total factor productivity.
• D) there is a large fraction of lenders in the economy.
• E) the central bank engages in open market operations.

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