When the Fed targets interest rates,rightward shifts in the IS curve force the Fed to ________ the money supply to hold to that target,which acts to ________ velocity.

Question

Quizplus · Accepted Answer

When the Fed targets interest rates and the IS curve shifts rightward, it typically means there is an increase in investment or consumption that would normally lead to higher interest rates. To maintain the targeted interest rate, the Fed would increase the money supply, which acts to stabilize velocity by offsetting the potential increase in interest rates that could reduce the velocity of money.

When the Fed Targets Interest Rates,rightward Shifts in the IS