To monetarists,the monetary base is important because

Question

Quizplus · Accepted Answer

Monetarists believe that the total money supply is dependent on and made from the monetary base. They argue that changes in the monetary base directly affect the money supply through the money multiplier effect. Therefore, the monetary base is an important indicator for understanding and predicting changes in the overall money supply. Option A is incorrect because the Fed can take policy actions that affect the monetary base. Option B is incorrect because changes in the monetary base can affect interest rates. Option C is incorrect because the monetary base is not based on gold certificate holdings. Option E is incorrect because the monetary base is not a definition of the money supply but rather a component of it.

To Monetarists,the Monetary Base Is Important Because