The Fed uses operating targets as well as intermediate targets because
A)the Federal Reserve Act of 1913 requires it to do so.
B)the Fed controls intermediate targets only indirectly.
C)the public is much more unfamiliar with the variables used as operating targets, so for policy to be effective intermediate targets must also be announced.
D)if one set of targets proves ineffective in attaining policy goals, the other set is available.

Question

Quizplus · Accepted Answer

The Fed uses operating targets (such as the federal funds rate) that it can influence directly through its monetary policy operations. Intermediate targets (like money supply growth or inflation rates) are influenced indirectly by the Fed's actions on its operating targets. The Fed does not control intermediate targets directly but aims to influence them through its control over operating targets.

The Fed Uses Operating Targets as Well as Intermediate Targets