Why Doesn't the Fed Have Both a Money Supply Target

question 210

Multiple Choice

Why doesn't the Fed have both a money supply target and an interest rate target?

• A)Short-term interest rates do not respond to changes in the money supply,which the Fed can control.
• B)The Fed does not control money demand.
• C)The Fed cannot offset the impact of changes in cash management by the public or changes in lending policies of commercial banks on the money supply.
• D)Only the level of interest rates matters when we consider rates of growth in real GDP,employment,and rates of price inflation.

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