If the Fed sets a fixed rate for money supply growth,it is using:
A) fiscal policy.
B) inflation targeting.
C) monetary targeting.
D) the Taylor rule.

Question

Quizplus · Accepted Answer

When the Fed sets a fixed rate for money supply growth, it is using monetary targeting. This means that the Fed is directly controlling the amount of money in circulation in the economy, in order to achieve its goals of stable prices, full employment, and sustainable economic growth. Fiscal policy involves the use of government spending and taxation to affect the economy, while inflation targeting involves setting a specific target for the rate of inflation and using monetary policy tools to achieve that target. The Taylor rule is a guideline for setting interest rates based on inflation and economic growth rates.

If the Fed Sets a Fixed Rate for Money Supply