The classical and Monetarist models agree that
A)the use of fiscal policy can stabilize output.
B)money demand is inherently unstable.
C)the public has perfect information about the price level.
D)increases in the money supply are the primary cause of inflation.
E)none of the above

Question

Quizplus · Accepted Answer

Both the classical and Monetarist models suggest that increases in the money supply are the primary cause of inflation. However, the classical model argues that the economy will self-correct through the market mechanism, while the Monetarist model advocates for central bank control of the money supply as a means of stabilizing the economy. They do not agree that fiscal policy can stabilize output, money demand is inherently unstable, or that the public has perfect information about the price level.

The Classical and Monetarist Models Agree That