When money demand increases, the Fed cannot keep the money supply from rising and the interest rate from rising at the same time.

Name: When money demand increases, the Fed cannot keep the money supply from rising and the interest rate from rising at the same time.
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Question

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If money demand increases, the Fed can either increase the money supply to keep interest rates stable or allow interest rates to rise by keeping the money supply constant, but it cannot do both simultaneously.

When Money Demand Increases, the Fed Cannot Keep the Money