If a Central Bank Targets the Interest Rate, What Does

question 103

Multiple Choice

If a central bank targets the interest rate, what does this imply?

• A) The central bank can then set the money supply at whatever value it wants.
• B) The central bank must increase the money supply if the interest rate is above its target.
• C) The central bank must decrease the money supply if the interest rate is above its target.
• D) The central bank must not change the money supply.

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