What, according to the monetarist theory of the business cycle, leads to changes in real GDP?
A) a change in the growth rate of the quantity of money
B) a change in the growth rate in tax revenue
C) an unanticipated change in aggregate demand
D) a change in profit expectations

Question

Quizplus · Accepted Answer

According to the monetarist theory, changes in the growth rate of the quantity of money cause changes in nominal GDP. In the short run, changes in nominal GDP lead to changes in real GDP due to sticky prices. Therefore, a change in the growth rate of the quantity of money would lead to changes in real GDP.

What, According to the Monetarist Theory of the Business Cycle