Milton Friedman argued that a central bank's control over the money supply could be used to peg which of the following?

Question

Quizplus · Accepted Answer

Friedman believed that the central bank's control over the money supply could be used to peg the level or growth rate of a nominal variable (such as the inflation rate or nominal GDP), but not the level or growth rate of a real variable (such as real GDP or real wages). Real variables are influenced by the availability of resources and technology, which are outside the control of the monetary authorities. Therefore, monetary policy can only affect nominal variables in the long run.

Milton Friedman Argued That a Central Bank's Control Over the Money