If the relationship between the monetary aggregate and the goal variable is weak,then
A)monetary aggregate targeting is superior to exchange-rate targeting.
B)monetary aggregate targeting is superior to inflation targeting.
C)inflation targeting is superior to exchange-rate targeting.
D)monetary aggregate targeting will not work.

Question

Quizplus · Accepted Answer

If the relationship between the monetary aggregate (such as the total amount of money in circulation or in a country's economy) and the goal variable (such as inflation or GDP growth) is weak, it implies that changes in the monetary aggregate will not reliably lead to desired changes in the goal variable. Therefore, targeting the monetary aggregate would not be effective, making option D correct.

If the Relationship Between the Monetary Aggregate and the Goal