Monetarists argue that the relationship between
A) the quantity of money the public wants to hold and the level of GDP is not stable.
B) the quantity of money the public wants to hold and the level of GDP is stable.
C) the quantity of money the public wants to hold and the level of saving is stable.
D) velocity and the interest rate varies directly.

Question

Quizplus · Accepted Answer

Monetarists believe in the Quantity Theory of Money, which states that the quantity of money in an economy determines the level of prices and that the velocity of money (how quickly money changes hands) is relatively stable. Therefore, they argue that the relationship between the quantity of money the public wants to hold (money demand) and the level of GDP is stable because changes in the money supply will lead to proportional changes in the price level, keeping the real demand for money (money demand adjusted for inflation) constant.

Monetarists Argue That the Relationship Between