Which of the following is considered a significant drawback of using interest rate targets?
A)Monetary aggregates are clearly preferable on the basis of the criterion of controllability.
B)Monetary aggregates are clearly preferable on the basis of the criterion of measurability.
C)A Fed policy to stabilize interest rates may be inconsistent with the Fed's goal of maintaining steady economic growth.
D)The Fed's influence over nominal interest rates is weaker than its influence over real interest rates.

Question

Quizplus · Accepted Answer

A significant drawback of using interest rate targets is that a Fed policy to stabilize interest rates may be inconsistent with the Fed's goal of maintaining steady economic growth. For example, if the economy is in a recessionary period and the Fed aims to lower interest rates to stimulate borrowing and spending, this may result in inflationary pressures, which could be detrimental to long-term economic growth. Therefore, policymakers must carefully balance the short-term benefits of interest rate targets with the long-term goals of economic stability and growth.

Which of the Following Is Considered a Significant Drawback of Using