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1. To control the rate of change in the price level the Fed would like to...

1. To control the rate of change in the price level the Fed would like to see the money supply growth be contained. They reduce the growth in the monetary base which slows the rate of growth in money supply. In this scenario which one of the following will be called the operating target?

A. The monetary base

B. The money supply

C. The inflation rate

2. To control the rate of change in the price level the Fed would like to see the money supply growth be contained. They reduce the growth in the monetary base which slows the rate of growth in money supply. In this scenario which one of the following will be called the intermediate target?

A. The monetary base

B. The money supply

C. The inflation rate
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Answer #1

1.The correct option is Option A i.e The monetary base

Operational targets is the continually shifting goal that guides day to day action.

2.The correct option is 'Option B' i.eMoney Supply

As we know,intermediate target is a variable that is not directly control,but respond fair quickly to policy actions.In the given case Money supply is not directly controlled but bears a predictable relationship with ultimate goal that is to control the rate of change in the price level.

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