If the Fed's primary goal is price stability which macroeconomic variable should it target?
A) the price level itself or a particular rate of change in the price level
B) the growth rate of money supply
C) the real money supply
D) real GDP

Question

Quizplus · Accepted Answer

If the Fed's primary goal is price stability, it should target the price level itself or a particular rate of change in the price level. This can be achieved through its monetary policy tools like interest rates and open market operations. By controlling the money supply and influencing interest rates, the Fed can regulate inflation or deflation, which affects the overall price level in the economy. The other options, like growth rate of money supply, real money supply, and real GDP, can indirectly impact price stability, but they are not the primary variables to target for achieving price stability.

If the Fed's Primary Goal Is Price Stability Which Macroeconomic