Most monetarists favor:
A) frequent changes in the growth rate of the money supply to avoid inflation.
B) placing the Federal Reserve under the Treasury.
C) a steady, gradual shrinkage of the money supply.
D) a constant increase in the money supply year after year equal to the potential annual growth rate in real GDP.

Question

Quizplus · Accepted Answer

Most monetarists favor a constant increase in the money supply year after year equal to the potential annual growth rate in real GDP. This approach is based on the belief that the long-run relationship between the money supply and inflation is strong, and that a steady increase in the money supply will lead to steady economic growth without causing inflation.

Most Monetarists Favor