Monetarists differ from Classical economists in that they argue that
A) changes in the money supply affect only the price level in the long run.
B) velocity is not fixed but is predictable.
C) the economy tends to be stable around full employment.
D) the demand for money is a fixed fraction of nominal GDP.

Question

Quizplus · Accepted Answer

Monetarists argue that velocity is not fixed but can be predicted based on economic conditions, which means that changes in the money supply can have short-term effects on the economy, including output and employment levels. This is different from Classical economists who believed that changes in the money supply only affect the price level in the long run. Options A, C, and D are not accurate descriptions of the differences between Monetarist and Classical economists.

Monetarists Differ from Classical Economists in That They Argue That