It is possible for the Fed to change the money supply without influencing the interest rate or influence the interest rate without impacting the money supply.

Question

Quizplus · Accepted Answer

The Federal Reserve influences the interest rate primarily through open market operations, which directly affect the money supply. When the Fed buys or sells government securities, it increases or decreases the money supply, which in turn influences the interest rate. It's challenging to change one without affecting the other because the supply of money and the interest rate are closely linked in monetary policy operations.

It Is Possible for the Fed to Change the Money