Assuming short-run sticky prices, the same monetary policy result may be achieved by targeting the money supply or the nominal rate of interest whenever:
A) the demand for money is stable.
B) interest income is not taxable.
C) changes in the supply of money are small and predictable.
D) real income is constant.

Question

Quizplus · Accepted Answer

When the demand for money is stable, targeting the money supply or the nominal interest rate can achieve the same monetary policy result because the relationship between the money supply, interest rates, and economic activity is predictable.

Assuming Short-Run Sticky Prices, the Same Monetary Policy Result May