If the principal instability in the economy is due to instability in the relationship between the monetary base and the money supply (because the currency-to-deposits and reserves-to-deposits ratios vary)
A) targeting interest rates will do little or nothing to stabilize the magnitude of shocks to the economy.
B) the Federal Reserve to take monetary policy action to shift the IS curve in the opposite direction of the shock.
C) it would be better to have a monetary policy reaction function that reacts to leading indicators and outcomes.
D) targeting interest rates will stabilize the magnitude of shocks to the economy.

Question

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The Answer of If the principal instability in the economy is due to instability in the relationship between the monetary base and the money supply (because the currency-to-deposits and reserves-to-deposits ratios vary)
A) targeting interest rates will do little or nothing to stabilize the magnitude of shocks to the economy.
B) the Federal Reserve to take monetary policy action to shift the IS curve in the opposite direction of the shock.
C) it would be better to have a monetary policy reaction function that reacts to leading indicators and outcomes.
D) targeting interest rates will stabilize the magnitude of shocks to the economy.

If the Principal Instability in the Economy Is Due to Instability