Monetarists believe:
A) the cause-and-effect relationship hypothesized by the Keynesians understates the impact of stimulative monetary policy.
B) the cause-and-effect relationship hypothesized by the Keynesians is an accurate description of how monetary policy works.
C) since the economy is operating at full employment, any stimulative monetary policy will cause the inflation rate to rise.
D) the cause-and-effect relationship hypothesized by the Keynesians is backwards, and decreases in the money supply actually stimulate economic activity.
E) the cause-and-effect relationship hypothesized by Keynesians will not work because investment does not respond to changes in interest rates.

Question

Quizplus · Accepted Answer

Monetarists believe that the economy tends to operate at or near full employment, and thus any stimulative monetary policy primarily leads to inflation rather than increases in output.

Monetarists Believe