Question

“If the demand for reserves did not fluctuate, the Fed could pursue both a reserves target and an interest-rate target at the same time.” Is this statement true, false, or uncertain? Explain

Short answer

True. In such a world, hitting a reserves target would imply that the Fed would likewise hit its interest-rate target or the other way around.

Step-by-step solution

Concept Introduction

Reserve Target implies target level of Available Fund Balance/Unrestricted Funds uses . A Target interest rate alludes to a given level of an interest rate with which the national bank tries to impact short-term interest rates, as a component of its monetary policy strategy.

Explanation

True. In such a world, hitting a reserves target would imply that the Fed would likewise hit its interest-rate target or the other way around. Consequently, the Fed could seek after both a reserves target and an interest-rate target simultaneously, yet provided that there was no variety in reserve demand.

Final Answer

True. In such a world, hitting a reserves target would imply that the Fed would likewise hit its interest-rate target or the other way around.