Controlling the growth of the supply of money will have predictable effects on interest rates if:
A) the demand for money is unpredictable.
B) the growth in the demand for money can be predicted accurately.
C) the interest rates are volatile.
D) the interest rates are low.

Question

Quizplus · Accepted Answer

If the growth in the demand for money can be accurately predicted, then controlling the growth of the supply of money will have predictable effects on interest rates. This is because the supply and demand for money determine interest rates. If the demand for money is unpredictable or interest rates are volatile, it becomes more difficult to predict the effects of controlling the money supply. Low interest rates, by themselves, do not determine the predictability of controlling the money supply.

Controlling the Growth of the Supply of Money Will Have