If the desired intermediate target is a monetary aggregate,which of the following would be the most preferred policy instrument?
A)The federal funds rate
B)The 90-day T-bill rate
C)The 180-day T-bill rate
D)The monetary base

Question

Quizplus · Accepted Answer

The monetary base (also known as high-powered money or M0) is the most direct policy instrument for controlling the supply of money, as it represents the total amount of currency in circulation plus bank reserves held at the central bank. Controlling the monetary base directly affects the growth of the money supply, making it the ideal choice for targeting a monetary aggregate. The federal funds rate, 90-day T-bill rate, and 180-day T-bill rate are all short-term interest rates that can influence economic activity but do not directly affect the money supply.

If the Desired Intermediate Target Is a Monetary Aggregate,which of the Following