In order to maintain stable prices, a central bank must
A)maintain low interest rates.
B)keep unemployment low.
C)tightly control the money supply.
D)sell indexed bonds.

Question

Quizplus · Accepted Answer

Tightly controlling the money supply is a direct method central banks use to influence inflation and thereby maintain stable prices. Adjusting the money supply affects economic activity, which in turn influences price levels.

In Order to Maintain Stable Prices, a Central Bank Must