If the Fed is targeting interest rates and money demand increases,an appropriate policy response would be to

Question

Quizplus · Accepted Answer

When the Fed targets interest rates and there is an increase in money demand, buying U.S. Treasury securities from government bond dealers is an appropriate policy response. This action injects liquidity into the banking system, helping to maintain the target interest rate despite the increased demand for money.

If the Fed Is Targeting Interest Rates and Money Demand