"Monetary policy can be described either in terms of the money supply or in terms of the interest rate." This statement amounts to the assertion that
A)rightward shifts of the money-supply curve cannot occur if the Federal Reserve decides to target an interest rate.
B)the activities of the Federal Reserve's bond traders are irrelevant if the Federal Reserve decides to target an interest rate.
C)changes in monetary policy aimed at expanding aggregate demand can be described either as increasing the money supply or as increasing the interest rate.
D)our analysis of monetary policy is not fundamentally altered if the Federal Reserve decides to target an interest rate.

Question

Quizplus · Accepted Answer

The statement suggests that whether the Federal Reserve targets the money supply or the interest rate, the analysis of monetary policy remains the same. Therefore, Option D is the correct answer. Option A is incorrect because a shift in the money supply curve could occur even if the interest rate is targeted. Option B is incorrect because the Federal Reserve's bond traders can influence the interest rate even if it is targeted. Option C is partially true, but it doesn't cover the full extent of the statement.

"Monetary Policy Can Be Described Either in Terms of the Money