If the Fed determines the amount of money in circulation, the interest rate is determined by the
A)required reserve ratio.
B)currency to deposit ratio.
C)money multiplier.
D)monetary base.
E)demand for money.

Question

Quizplus · Accepted Answer

The interest rate is determined by the demand for money, which in turn is affected by factors such as inflation expectations, economic growth, and consumer confidence. The Fed can influence the interest rate through its monetary policy actions, but ultimately it is the market forces of supply and demand that determine the actual interest rate. The other options listed (required reserve ratio, currency to deposit ratio, money multiplier, and monetary base) are all important concepts in understanding the mechanics of the monetary system, but they do not directly determine the interest rate.

If the Fed Determines the Amount of Money in Circulation