Econometric models of the U.S. economy generally agree:
A) that an increase in money growth will increase output in the short run.
B) on the quantitative impact of monetary policy over a horizon of several years.
C) that rational expectations is the best way to generate policy forecasts.
D) that an increase in money growth will decrease output in the long run.
E) that an increase in money growth will decrease output in the short run.

Question

Quizplus · Accepted Answer

Econometric models generally agree that an increase in money growth will increase output in the short run. This is consistent with the idea of the Phillips Curve, which suggests that there is a negative relationship between unemployment and inflation in the short run. An increase in the money supply can stimulate demand and therefore output in the short run, but it may also lead to higher inflation over time.

Econometric Models of the U.S. Economy Generally Agree