Which of the following is consistent with the monetarist view?
A) A reduction in taxes will leave the value of real output unaffected.
B) Prices may be affected by increases in G or reductions in T.
C) Changes in M may cause changes in V and Q in the long run.
D) Monetary policy should be used to correct a shortfall in aggregate demanD.This follows the logic of crowding out: lower taxes will lead to lower government spending but ultimately to higher private sector spending.
Correct Answer:
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