The Federal Reserve could target both the money supply and the interest rate at the same time if it controlled money demand along with money supply.

Question

Quizplus · Accepted Answer

If the Federal Reserve can control both the money supply and money demand, then it can target both the money supply and interest rate simultaneously through the use of open market operations, reserve requirements, and discount rates. By adjusting these levers, the Federal Reserve can influence the amount of money in circulation and the demand for money, leading to changes in interest rates.

The Federal Reserve Could Target Both the Money Supply and the Interest