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If a Central Bank Were to Set an Interest Rate

Question 43

Multiple Choice

If a central bank were to set an interest rate target and stick to it,


A) much of the economy's instability would be eliminated
B) the central bank would no longer be able to control money supply
C) the central bank would never be able to provide sufficient money for economic growth to get the economy out of a recession
D) inflation would no longer be a problem since the central bank would have credibility
E) velocity would become very stable even in the short run

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