Economist Jones favors a constant-money-growth-rate rule.She says that if the annual money supply growth rate each year is equal to the average annual growth rate in Real GDP,price stability will exist over time.What would economist Smith,who favors activist monetary policy,say to economist Jones?

Question

Quizplus · Accepted Answer

Economist Smith would likely argue that Jones' analysis is flawed because it assumes that velocity is constant, which is not necessarily true, and also assumes that the definition of money supply is clear, which can be subject to debate. Smith would not necessarily argue that Real GDP is constant over time, so option A is not the best choice. Therefore, the best choice is D, which includes the correct critiques of Jones' analysis.

Economist Jones Favors a Constant-Money-Growth-Rate Rule