-Refer to Figure . If the Fed increases the money supply in response to the change in demand from D to D', then
A)the Fed is targeting the interest rate.
B)the Fed's policy can be described as accommodating.
C)the Fed is not targeting the money supply.
D)All of the above are true.

Question

-Refer to Figure . If the Fed increases the money supply in response to the change in demand from D to D', then
A)the Fed is targeting the interest rate. 
B)the Fed's policy can be described as accommodating. 
C)the Fed is not targeting the money supply. 
D)All of the above are true.

Quizplus · Accepted Answer

The Fed increasing the money supply in response to a change in demand indicates it is targeting the interest rate to maintain stability, accommodating the economy's needs, and thus not strictly targeting the money supply, as it adjusts it in response to economic conditions.