If the Fed wanted to prevent a change in money demand from affecting real GDP,which of the following rules would be feasible and allow the Fed to attain its goal?
A) Keep government spending constant
B) Keep the money supply constant
C) Keep money demand constant
D) Keep taxes constant
E) Keep the interest rate constant.

Question

Quizplus · Accepted Answer

Keeping the interest rate constant would help stabilize the economy by offsetting changes in money demand, thus preventing those changes from affecting real GDP.

If the Fed Wanted to Prevent a Change in Money