Refer to the figure below where the nominal interest rate equals 6% and the money supply equals 600. If the Federal Reserve wants to raise the interest rate to 8%, it must _____ the money supply to _____.

Question

Quizplus · Accepted Answer

The nominal interest rate is determined by the intersection of the money supply and money demand curves. For the Fed to increase the nominal interest rate to 8%, it must decrease the money supply to 400.

Refer to the Figure Below Where the Nominal Interest Rate