Monetarists argue that
A) the Federal Reserve System should institute a prescribed rate of growth in the money supply.
B) since velocity is unstable, a fixed annual increase in the money supply will exacerbate inflation in the long run.
C) self-correction is less effective than activist monetary policy.
D) policymakers should use monetary policy rather than fiscal policy to stabilize the economy.

Question

Quizplus · Accepted Answer

Monetarists argue that the Federal Reserve System should institute a prescribed rate of growth in the money supply, as they believe that inflation is primarily caused by growth in the money supply. They argue that by controlling the money supply growth, the Fed can stabilize the economy and help prevent inflation.

Monetarists Argue That