What was Milton Friedman's reasoning behind the 3 percent growth rule for money supply?
A) monetary neutrality
B) increasing long-run economic growth rates
C) minimization of negative supply shocks
D) price stability

Question

Quizplus · Accepted Answer

Milton Friedman believed that the primary role of monetary policy was to maintain price stability. He argued that excessive growth in the money supply would lead to inflation and economic instability. Therefore, he proposed the 3 percent growth rule for the money supply as a way to achieve and maintain price stability. This rule was based on the idea that a steady and predictable growth rate in the money supply would help minimize the impact of inflationary or deflationary shocks on the economy.

What Was Milton Friedman's Reasoning Behind the 3 Percent Growth