Models describing the determination of the money supply and the Fed's role in this process normally focus on ________ rather than ________,since Fed actions have a more predictable effect on the former.

Question

Quizplus · Accepted Answer

The monetary base and reserves are closely related concepts, but in the context of the Federal Reserve's influence on the money supply, models typically focus on the monetary base rather than reserves. This is because the Fed's actions, such as open market operations, directly affect the monetary base (which includes reserves and currency in circulation) in a more predictable and controllable manner than they would affect reserves alone.

Models Describing the Determination of the Money Supply and the Fed's