Monetarists believe that in the short run, a change in the money supply can affect _____, while in the long run, a change in the money supply will affect _____ only.
A) output and the price level; output
B) output only; the price level
C) output and the price level; the price level
D) the price level only; output

Question

Quizplus · Accepted Answer

Monetarists, following the theories of Milton Friedman, argue that in the short run, changes in the money supply can influence both real output (economic activity) and the price level (inflation). However, in the long run, they believe that the economy adjusts to these changes, and the primary effect of changes in the money supply is on the price level only, with no long-term impact on real output.

Monetarists Believe That in the Short Run, a Change in the Money