Assume that the stock of money is determined by the Federal Reserve and does not change when the interest rate changes. This situation means that the
A) supply of money curve is vertical.
B) supply of money curve is horizontal.
C) demand for money curve is directly related to the interest rate.
D) supply of money curve is inversely related to the interest rate.

Question

Quizplus · Accepted Answer

If the stock of money is determined by the Federal Reserve and does not change when the interest rate changes, then the supply of money curve is vertical. This is because the quantity of money supplied does not depend on the interest rate, so there is no relationship between the two.

Assume That the Stock of Money Is Determined by the Federal