Most economists believe that the best monetary policy target is
A)an interest rate.
B)the money supply.
C)total bank reserves.
D)the discount rate.

Question

Quizplus · Accepted Answer

Most economists believe that an interest rate is the best monetary policy target because it can influence investment, consumption, and saving decisions, which ultimately affect aggregate demand and overall economic activity. By adjusting the interest rate, central banks can control the cost of borrowing money and affect the risk-taking behavior of financial institutions and investors, leading to changes in spending and inflation. The money supply and total bank reserves are also important indicators, but they are often considered secondary targets to interest rates. The discount rate is the rate at which banks can borrow from the central bank, and while it is an important tool for managing liquidity, it is not as effective in influencing economic activity as interest rates.

Most Economists Believe That the Best Monetary Policy Target Is