Monetarists argue that the Federal Reserve should allow the money supply to grow

Question

Monetarists argue that the Federal Reserve should allow the money supply to grow

Question 9 options:

A) counter to the business cycle.

B) faster than 10 percent annually.

C) only during recessions.

D) at some constant rate between 3 and 5 percent.

Monetarists argue that fiscal policy is ineffective because

Question 10 options:

A) the crowding-out effect reduces investment.

B) the velocity of money is predictable.

C) prices and wages are sticky in the short run.

D) it causes the value of the dollar to depreciate.

Explanation / Answer

Question 9

Monetarists recommends the use of monetary policy to manage business cycle fluctuations. They believe that by managing the growth rate of money supply, business cycle fluctuations can be managed effectively and any deviations can be corrected in quick time without letting the problem go out of hand.

As per the Monetarists, Federal Reserve should allow the money supply to grow at some constant rate between 3 and 5 percent.

The correct answer is the option (D).

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