_____ keeps the growth of money stocks, such as M1 and M2, on a steady path, following the equation of exchange.
A) Inflation targeting
B) The Friedman rule
C) The Taylor rule
D) A monetary rule

Question

Quizplus · Accepted Answer

A monetary rule is a specific policy that determines how a central bank sets interest rates and controls the money supply to achieve certain economic goals. One type of monetary rule is known as the equation of exchange, which states that the nominal gross domestic product (NGDP) equals the money supply (M) multiplied by the velocity of money (V), which is the rate at which money is spent on goods and services. By manipulating the money supply, the central bank can influence inflation and economic growth. A monetary rule based on the equation of exchange can help keep the growth of money stocks, such as M1 and M2, on a steady path.

_____ Keeps the Growth of Money Stocks, Such as M1