The reason that economists are so interested in the stability of velocity is because if the demand for money is not stable,then steady growth of the money supply
A)is going to promote price stability at the expense of low unemployment.
B)is going to promote low unemployment at the expense of price stability.
C)is an ineffective way to conduct monetary policy.
D)can still be used to conduct monetary policy if the goal is price stability.

Question

Quizplus · Accepted Answer

If the demand for money is not stable, then the relationship between money supply and economic activity becomes unpredictable. This makes it difficult for the central bank to use changes in the money supply to achieve its macroeconomic goals, such as price stability and low unemployment. Therefore, conducting monetary policy without a stable velocity of money is ineffective.

The Reason That Economists Are So Interested in the Stability