According to the monetarists,the ratio of nominal GDP to the money stock should be
A)highly unstable in short run and in long run.
B)unstable only during recession.
C)unstable only in the long run.
D)quite stable in the short run and the long run.
E)unstable only if the LM curve shifts.

Question

Quizplus · Accepted Answer

Monetarists believe in the Quantity Theory of Money, which states that in the long run, changes in the money supply will translate proportionally into changes in the price level and nominal GDP. Therefore, the ratio of nominal GDP to the money stock should remain relatively stable in the long run. In the short run, there may be some fluctuations due to changes in velocity or shifts in the LM curve, but overall, the ratio should still be relatively stable.

According to the Monetarists,the Ratio of Nominal GDP to the Money