Monetarists maintain that the increase in the money supply can explain the inflation of the 1970s ?and 1980s when one considers the bonds purchased by the Fed to finance the federal deficits of the period.

Question

Quizplus · Accepted Answer

Monetarists argue that inflation is caused by an increase in the money supply, and point to the Fed's purchase of bonds to finance federal deficits as an example of this. They believe that increasing the money supply leads to an increase in demand for goods and services, which can drive up prices. Therefore, the statement is true.

Monetarists Maintain That the Increase in the Money Supply Can