According to monetarists:
A) changes in the money supply are the primary cause of changes in the price level.
B) an expansionary fiscal policy will lower interest rates and overstimulate the economy.
C) changes in the velocity of money are more important than changes in the money supply in causing the level of economic activity to change.
D) the supply of money changes in response to changes in the levels of real output and prices.

Question

Quizplus · Accepted Answer

Monetarists believe that changes in the money supply are the primary cause of changes in the price level. They argue that if the money supply increases faster than the growth of output, inflation will result, while if the money supply grows slower than output, deflation will occur. Therefore, controlling the money supply is seen as the primary tool for avoiding inflation and maintaining price stability.

According to Monetarists