The money supply (measured by any of the aggregates discussed in class) and the interest rate (any general interest rate in the economy) are important for the conduct of monetary policy. Describe their place in the monetary policy process by indicating the correct answers below:

The money supply (measured by any of the aggregates discussed in class) and the interest rate (any general interest rate in the economy) are the main ___________ targets of monetary policy.

a. operational

b. intermediate

c. final

d. leading

e. exogenous

These targets are subject to direct, complete and fast control by the central bank.

True

False

When the central bank decides to maintain a certain level of the interest rate, it can do it using ____________ through which it expands or contracts the _____________, and this through the process of money creation causes a change in ___________.

a. discount loans; monetary base; money multiplier

b. discount loans; money multiplier; money supply

c. open market operations; monetary base; money supply

d. open market operations; money multiplier; monetary base

The main reason why the money supply and the interest rate cannot simultaneously be targeted by monetary policy is the fact that the preference of people to hold their savings in money rather than in other financial instruments is unknown and variable.

True

False

Answer rating: 100% (QA)

1 Intermediate target Explanation intermediate target is a target which is in between the monetary p... View the full answer