The money supply curve is vertical if
A)banks and the Fed jointly determine the money supply.
B)the Fed is able to completely determine the money supply.
C)banks and households determine the money supply.
D)households and the Fed jointly determine the money supply.

Question

Quizplus · Accepted Answer

The money supply curve is vertical if the Fed is able to completely determine the money supply. This is because, in this scenario, any increase in the demand for money can only be met by an equal increase in the supply of money determined by the Fed. The behavior of banks and households is irrelevant in this case.

The Money Supply Curve Is Vertical If