Starting in 1974,the conventional M1 money demand function began to
A)severely underpredict the demand for money.
B)severely overpredict the demand for money.
C)predict more precisely the demand for money.
D)do none of the above.

Question

Quizplus · Accepted Answer

Starting in 1974, the conventional M1 money demand function began to severely overpredict the demand for money. This was due to changes in financial markets and innovations that made the traditional models, which were based on past behaviors and relationships, less accurate in predicting money demand.

Starting in 1974,the Conventional M1 Money Demand Function Began to