A central bank which sets the short-term rate of interest must:

Name: A central bank which sets the short-term rate of interest must:
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Question

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A central bank that sets the short-term interest rate must meet the resulting demand for reserves to maintain that rate. When the central bank sets a target for the short-term interest rate, it must supply the necessary amount of reserves to the banking system to meet the demand at that rate. If it does not, the actual rate will deviate from the target rate.

A Central Bank Which Sets the Short-Term Rate of Interest