Given the equation of exchange, MV = PY, when central bankers control short-term nominal interest rates by adjusting the level of reserves in the banking system, their actions are expected to primarily affect:
A)The rate of growth of V
B)The value of V
C)Potential Y as opposed to current Y
D)The rate of growth of M

Question

Quizplus · Accepted Answer

Central bankers control the money supply (M) by adjusting reserves, which directly affects the rate of growth of M.

Given the Equation of Exchange, MV = PY, When Central