The main belief of the monetarist model is that
A)workers and firms have rational expectations.
B)the quantity of money should be increased at a constant rate.
C)productivity shocks explain fluctuations in real GDP.
D)the economy is slow to adjust to sticky wages and prices.

Question

Quizplus · Accepted Answer

The main belief of the monetarist model is that the quantity of money should be increased at a constant rate. Monetarists believe that changes in the money supply have a direct impact on the level of economic activity, and that the government should therefore focus on controlling the money supply in order to stabilize the economy. They believe that if the money supply grows too quickly, it will lead to inflation, while if it grows too slowly, it will lead to recession. By maintaining a constant rate of growth in the money supply, monetarists believe that they can achieve a stable and predictable economic environment.

The Main Belief of the Monetarist Model Is That