Intermediate targeting the money supply is preferable if there is a(n)
A)increase in the severity of supply shocks.
B)unstable money demand function.
C)low interest elasticity of money demand.
D)difficulty in the measurement of money demand.
E)none of the above.

Question

Quizplus · Accepted Answer

When the interest elasticity of money demand is low, changes in interest rates have little effect on the demand for money, making money supply targeting more effective.

Intermediate Targeting the Money Supply Is Preferable If There Is