To implement the Friedman rule, the monetary authority needs to set the money growth rate so that

Question

Quizplus · Accepted Answer

The Friedman rule states that the money growth rate should be set equal to the negative of the real interest rate. This is because the real interest rate is the opportunity cost of holding money, and if the money growth rate is higher than the real interest rate, then people will hold more money than they otherwise would, which will lead to inflation.

To Implement the Friedman Rule, the Monetary Authority Needs to Set