Under the monetary growth rule proposed by the monetarists, the money supply would grow each year at a constant rate equal to the long-run rate of growth of
A)inflation.
B)real GDP.
C)interest rates.
D)employment.
E)population.

Question

Quizplus · Accepted Answer

The monetarists proposed that the money supply should grow each year at a constant rate equal to the long-run rate of growth of real GDP. This is because they believed that changes in the money supply would directly impact inflation in the long run, but would have little impact on real GDP or employment. By keeping the growth rate of the money supply in line with the long-run rate of growth of real GDP, they hoped to achieve price stability without disrupting economic growth.

Under the Monetary Growth Rule Proposed by the Monetarists, the Money