If the Fed is targeting the money supply,it loses control over the interest rate.

Question

Quizplus · Accepted Answer

When the Fed targets the money supply, it limits the availability of funds in the economy, which can cause interest rates to rise or fall beyond the Fed's intended target. This is because the demand for money by households, businesses, and banks can affect the interest rate, regardless of the Fed's policy stance. Therefore, targeting the money supply can lead to a loss of control over interest rates.

If the Fed Is Targeting the Money Supply,it Loses Control