In monetarist business cycle theory, decreasing the growth rate of the quantity of money__________
And increasing the growth rate of the quantity of money__________ .
A) causes the economy to enter an expansion; causes the economy to enter a recession
B) increases real GDP; decreases the inflation rate
C) causes the economy to enter a recession; causes the economy to enter an expansion
D) decreases real GDP; decreases the inflation rate

Question

Quizplus · Accepted Answer

In monetarist business cycle theory, decreasing the growth rate of the quantity of money causes the economy to enter a recession as there will be less money for businesses to invest and consumers to spend. On the other hand, increasing the growth rate of the quantity of money causes the economy to enter an expansion as there will be more money available for businesses to invest and consumers to spend.

In Monetarist Business Cycle Theory, Decreasing the Growth Rate of the Quantity