Adherents of the traditional monetary rule advocate that the
A) functional ﬁnance approach to ﬁscal policy be adopted.
B) money supply should be increased by a constant rate year after year.
C) money supply should be reduced during inﬂation and increased during recession.
D) money supply should be increased during inﬂation and reduced during recession.

Question

Quizplus · Accepted Answer

Adherents of the traditional monetary rule believe that the money supply should be increased by a constant rate year after year, typically equal to the growth rate of potential real GDP. This approach aims to maintain a stable and predictable value of money, which is seen as critical for facilitating efficient economic transactions and fostering long-term investment.

Adherents of the Traditional Monetary Rule Advocate That the