Monetarists argue that the Bank of Canada should pursue ________.

Question

Quizplus · Accepted Answer

Monetarists argue for a constant growth rate rule, where the central bank sets a target growth rate for the money supply, based on the long-run growth rate of real output. They believe that a stable and predictable growth rate of money supply will promote long-term economic growth, low inflation, and a stable exchange rate. Interest-rate targeting and discretionary monetary policy are not favored by monetarists as they are seen as leading to discretionary risk-taking, higher inflation and greater instability. Exchange-rate targeting is not as relevant in a flexible exchange rate regime, as in Canada.

Monetarists Argue That the Bank of Canada Should Pursue ________