In the short run when prices don't have enough time to change, the Federal Reserve
A) can influence the level of interest rates in the economy.
B) cannot influence the level of interest rates in the economy.
C) can influence the level of interest rates in the economy but generally will not because it would be destabilizing.
D) can only affect the amount of money in the economy.

Question

Quizplus · Accepted Answer

In the short run, the Federal Reserve can influence the level of interest rates in the economy through open market operations, changing the discount rate, or adjusting reserve requirements. These actions affect the supply of money in the economy, which then impacts interest rates.

In the Short Run When Prices Don't Have Enough Time