(Consider This) Monetarists would argue that the severe recession of 2007-2009 was primarily caused by
A) adverse aggregate-supply shocks causing tremendous unemployment.
B) wide swings in investment expenditures driving erratic ﬂuctuations in aggregate demand.
C) excessive money supply creating a bubble in some sectors of the economy.
D) too much deregulation of the ﬁnancial sector in previous years.

Question

Quizplus · Accepted Answer

Monetarists focus on the relationship between money supply and the economy. They argue that excessive money supply can lead to inflation and cause a bubble in some sectors of the economy. This view aligns with the notion that the recession was spurred by the housing bubble and the subsequent collapse of the mortgage market, which was facilitated by loose lending standards and excessive availability of credit. Therefore, C is the best choice.

(Consider This) Monetarists Would Argue That the Severe Recession of 2007-2009