Monetarists believe that
A) prices and wages are inﬂexible or sticky.
B) both product and resource markets are monopolistic.
C) velocity is relatively stable.
D) the economy is more stable when active ﬁscal and monetary policy are used.

Question

Quizplus · Accepted Answer

Monetarists believe that velocity (the rate at which money is exchanged) is relatively stable and therefore changes in the money supply have predictable effects on prices and economic activity. They advocate for a steady increase in the money supply at a rate consistent with economic growth. They do not believe that active fiscal policy is effective in stabilizing the economy.

Monetarists Believe That