Some Economists Argue That the Fed Should Commit to Keeping $\vec{ M }$

Some economists argue that the Fed should commit to keeping $\vec{ M }$ + $\vec { v }$ fixed at a particular value,say 5%.How would this rule require the Fed to respond in the event of a negative spending shock? A negative real shock?

A) increase

$\vec{ M }$ ;do nothing
B) increase
$\vec { M }$ ;increase
$\vec{ M }$
C) increase
$\vec{ M }$ ;decrease
$\vec{ M }$
D) decrease
$\vec{ M }$ ;increase
$\vec{ M }$

Correct Answer:

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