If the desired intermediate target is an interest rate, then the preferred policy instrument will be a(n) ________ variable like the ________.
A) interest rate; three-month T-bill rate
B) interest rate; overnight rate
C) monetary aggregate; monetary base
D) monetary aggregate; nonborrowed base

Question

Quizplus · Accepted Answer

The preferred policy instrument for targeting an interest rate would be another interest rate variable, such as the overnight rate, which central banks directly influence through their monetary policy operations.

If the Desired Intermediate Target Is an Interest Rate, Then