When the Fed uses monetary policy targets, they cannot use both a money supply target and an interest rate target at the same time because

A. It is easier for the Fed to keep track of, and influence, the interest rate

B. Interest rates are determined by money supply and money demand that the Fed does not control money demand

C. The Fed is only allowed to choose one target at a time to publish the Congress

Question

Business

Gisselle Monroe

20 February, 11:40

When the Fed uses monetary policy targets, they cannot use both a money supply target and an interest rate target at the same time because

A. It is easier for the Fed to keep track of, and influence, the interest rate

B. Interest rates are determined by money supply and money demand that the Fed does not control money demand

C. The Fed is only allowed to choose one target at a time to publish the Congress

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Answers (1)

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Rhett · Answer 1

When the Fed uses monetary policy targets, they cannot use both a money supply target and an interest rate target at the same time because Interest rates are determined by money supply and money demand that the Fed does not control money demand.

Explanation:

The Federal Reserve System is the United States of America's central banking system. It has been created in the wake of a sequence of financial collapses on 23 December 1913, with the implementation of the Federal Reserve Act, leading to the need to centrally control the financial system to ease financial crises.

The Fed cant seeks to supply both liquidity and interest rates even though the interest rate is dictated by the relationships between the supply of money and money demand and income consumption, which is not in the control of fed people living in the economy.