If the Federal Reserve wishes to maintain an unchanging target interest rate and the demand for money is rising, then the Fed will:
A) raise the inflation rate.
B) reduce the demand for money.
C) increase the supply of money.
D) decrease the supply of money.

Question

Quizplus · Accepted Answer

To maintain an unchanging target interest rate while the demand for money is rising, the Federal Reserve would increase the supply of money. This action helps to balance the increased demand without needing to change the interest rate.

If the Federal Reserve Wishes to Maintain an Unchanging Target