Question

If the Central Bank sets the money supply independent of the interest rate, then the money...

If the Central Bank sets the money supply independent of the interest rate, then the money supply curve is

Select one:

A. horizontal.

B. upward sloping

C. downward sloping.

D. vertical.

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Homework Answers

Answer #1

if we talk in simple terms then money supply curve represents the relationship between interest rate and quantity of money for any bank

From the given question if the central bank sets the money supply curve but the interest rate rate is independent which means it is zero

So the curve is horizontal in nature

When the quantity of money is fixed then the curve is vertical in nature

The correct answer here is option A

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