Which of the following is TRUE regarding the monetarist theory of the business cycle?
I. Monetarists assume that the quantity of money increases at a constant rate.
II. Fluctuations in interest rates cause business cycles.
III. Changes in the growth rate of the quantity of money affect aggregate demand.
A) III only
B) II and III
C) I only
D) I and II

Question

Quizplus · Accepted Answer

Monetarists believe that changes in the growth rate of the money supply can affect aggregate demand, leading to business cycles. They do not necessarily assume a constant rate of money supply increase, nor do they attribute business cycles to interest rate fluctuations.

Which of the Following Is TRUE Regarding the Monetarist Theory