If investment spending is unstable, to stabilize output the central bank should target the
A) money supply.
B) interest rate.
C) reserve requirement
D) none of the above.

Question

Quizplus · Accepted Answer

The central bank should target the money supply to stabilize output when investment spending is unstable. This is because the money supply is a key determinant of aggregate demand, and by targeting the money supply, the central bank can help to ensure that aggregate demand is stable.

If Investment Spending Is Unstable, to Stabilize Output the Central