Suppose the growth rate of the quantity of money increased from 5 percent per year to 8 percent per year. According to the__________ , this event would trigger a business cycle expansion.

Question

Quizplus · Accepted Answer

According to the monetarist cycle model, changes in the money supply are the primary driver of business cycles. An increase in the growth rate of the quantity of money would lead to an increase in aggregate demand, leading to a business cycle expansion. The other models listed are not primarily focused on changes in the money supply as a driver of business cycles.

Suppose the Growth Rate of the Quantity of Money Increased