When the Central Bank Targets the Interest Rate

question 39

Multiple Choice

When the central bank targets the interest rate

• A) it does so by adjusting the money supply.
• B) the money supply is fixed.
• C) the target interest rate must be changed eight times a year.
• D) the money supply is reduced.
• E) the money supply is sticky.

---

Definitions:

Equilibrium Quantity

The quantity of goods supplied is equal to the quantity demanded at a given price level.

Equilibrium Price

The price at which the quantity of a good supplied equals the quantity demanded, resulting in no surplus or shortage in the market.

Zero Economic Profit

A situation where a firm's total revenues exactly equal its total costs, indicating no above-normal profit.

Economist

A professional or expert in economics, studying the production, distribution, and consumption of goods and services.