(Figure: Interest Rate Targeting) The figure shows interest rate targeting. Initially, the fed funds interest rate equilibrium (E) is the targeted interest rate (iT). If money demand increases, the Federal Reserve _____ to maintain the interest rate target.

A) decreases the interest rate
B) increases the interest rate
C) decreases the money supply
D) increases the money supply

Question

(Figure: Interest Rate Targeting) The figure shows interest rate targeting. Initially, the fed funds interest rate equilibrium (E) is the targeted interest rate (iT). If money demand increases, the Federal Reserve _____ to maintain the interest rate target.
 
A) decreases the interest rate 
B) increases the interest rate 
C) decreases the money supply 
D) increases the money supply

Quizplus · Accepted Answer

The Answer of (Figure: Interest Rate Targeting) The figure shows interest rate targeting. Initially, the fed funds interest rate equilibrium (E) is the targeted interest rate (iT). If money demand increases, the Federal Reserve _____ to maintain the interest rate target.
 
A) decreases the interest rate 
B) increases the interest rate 
C) decreases the money supply 
D) increases the money supply

(Figure: Interest Rate Targeting) the Figure Shows Interest Rate Targeting