Friedman argued that the Fed could use monetary policy to peg a rate for

Question

Quizplus · Accepted Answer

Friedman's argument was that the Fed could use monetary policy to maintain a fixed exchange rate by adjusting the money supply to ensure that the interest rate in the domestic economy matches the interest rate in the foreign country with which the exchange rate is pegged. This was known as the "monetarist" approach to monetary policy. He did not believe that monetary policy could be used to directly control real GDP or unemployment, as these were determined by real factors in the economy such as technology, productivity, and demographics.

Friedman Argued That the Fed Could Use Monetary Policy to Peg