How to change supply of money in response of economy

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Reference no: EM13241477

If the Fed chooses the money supply at the same time as people are setting wages and prices, so that everyone has the same information about the state of the economy, then monetary policy cannot be used systematically to stabilize output. Hence, a policy of keeping the money supply constant will have the same real effects as the policy of changing the supply of money in response to the state of the economy.

Reference no: EM13241477

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