Economists who accept the quantity theory of money favor a monetary rule because they believe the short-run effects of monetary policy are unpredictable and the long-run effects are on the price level, not real output.

Question

Quizplus · Accepted Answer

Economists who accept the quantity theory of money indeed favor a monetary rule, as they argue that while the short-run effects of monetary policy can be unpredictable and potentially destabilizing, its long-run effects predominantly influence the price level rather than real output. This perspective leads them to advocate for a predictable, rule-based approach to monetary policy to ensure long-term price stability.

Economists Who Accept the Quantity Theory of Money Favor a Monetary