Milton Friedman would eliminate the destabilizing effect of the Central Bank's monetary policy by

Question

Quizplus · Accepted Answer

Milton Friedman's proposal was to require the Central Bank to choose a monetary aggregate (such as M1 or M2) and increase it at a fixed percentage rate each year. This would eliminate the discretionary power of the Central Bank to manipulate the money supply and interest rates for short-term political ends, which Friedman believed was a source of instability and inflationary pressure. By tying the monetary policy to a fixed rule, Friedman argued that the private sector would have a better guide for planning and investment, and the economy would be more stable in the long run. Hence, the option C is the best choice for this question.

Milton Friedman Would Eliminate the Destabilizing Effect of the Central