Multiple Choice
Exhibit 16-6 
-If the Fed is targeting interest rates and money demand shifts from Dm to Dm' in Exhibit 16-6, the Fed will
A) do nothing and the interest rate will rise to i'
B) do nothing and the interest rate will settle at i
C) decrease the money supply to restore its target of i
D) increase the money supply to restore its target of i
E) decrease money demand back to Dm to restore its target of i
Correct Answer:
Verified
Correct Answer:
Verified
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