If the Federal Reserve sets a target nominal interest rate, it can:
A)independently set a target money supply.
B)only set a money supply target that is consistent with the nominal interest rate target.
C)achieve this target with any arbitrary supply of money.
D)shift the money demand curve to the right.

Question

Quizplus · Accepted Answer

The Federal Reserve can set a target nominal interest rate or a target money supply, but not both. The money supply is within the Fed's control but money demand is not.

If the Federal Reserve Sets a Target Nominal Interest Rate