Figure 13-3
-In the figure above, given the unstable demand for money and a stable commodity demand, a stable output level at C would best be promoted by

Question

Figure 13-3 
-In the figure above, given the unstable demand for money and a stable commodity demand, a stable output level at C would best be promoted by

Quizplus · Accepted Answer

Targeting interest rates by the Fed can help stabilize the demand for money, which in turn can help stabilize output levels. Decreasing taxes or increasing expenditures may stimulate demand, but may also lead to inflation and instability in the long run. Decreasing government expenditures may lead to a decrease in demand and output levels, which can exacerbate the instability in the economy.

Figure 13-3 -In the Figure Above, Given the Unstable Demand for Money