To be successful in stabilizing AD,the application of a constant growth-rate rule for the money supply requires
A)a constant velocity of money.
B)a steady and predictable rate of growth of the velocity of money.
C)a steady and predictable rate of growth of the velocity of income.
D)Both B and C are correct.

Question

Quizplus · Accepted Answer

A constant growth-rate rule for the money supply can only lead to stabilization of AD if the velocity of money also grows at a steady and predictable rate. However, a constant velocity of money is not necessarily required. Therefore, option A is incorrect. Option D is also incorrect as the velocity of income is not directly related to the stabilization of AD. Thus, the correct option is B.

To Be Successful in Stabilizing AD,the Application of a Constant