Answered: the Fed believes that the quantity of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Why does the Fed not target the quantity of money?

The Fed does not target the quantity of money because _______.

the Fed believes that it does not have enough control over the quantity of money because it is the banks that determine the quantity of loans and deposits

the Fed believes that the quantity of money should remain constant

Congress has passed laws that disallow this action by the Fed

the Fed believes that if it changed the demand for money, the interest rate would fall and the growth of aggregate demand would slow down

the Fed believes that the demand for money is too unstable

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