Monetarists contend that a consistent relationship exists between changes in the money
Jsupply and changes in nominal GDP.

Question

Quizplus · Accepted Answer

Monetarists believe in the Quantity Theory of Money, which states that changes in the money supply have a direct and proportional effect on changes in nominal GDP. This relationship is expressed as MV=PY, where M is the money supply, V is the velocity of money, P is the price level, and Y is real GDP. Therefore, monetarists would argue that if the money supply increases, nominal GDP will also increase.

Monetarists Contend That a Consistent Relationship Exists Between Changes in the Money