Which of the following statements about the monetarist view of the macroeconomy is incorrect?
A)Left alone, the economy rarely operates at full employment.
B)All recessions result from inappropriate monetary policy.
C)The money wage rate is sticky.
D)Taxes should be kept low to avoid disincentive effects that decrease potential GDP.
E)Provided that the quantity of money is kept on a steady growth path, no active stabilization is needed to offset changes in aggregate demand.

Question

Quizplus · Accepted Answer

Monetarists, such as Milton Friedman, believe that the economy is inherently stable and tends to operate at or near full employment if left alone. They argue that most economic fluctuations are due to inappropriate monetary policy, rather than the economy's natural instability.

Which of the Following Statements About the Monetarist View of the Macroeconomy