Monetarists argue that:
A) the impact lag for monetary policy is short and predictable.
B) stabilization policies may actually be destabilizing.
C) the Bank of Canada should use active monetary policy.
D) active monetary policy should be used to reinforce active fiscal policy.

Question

Quizplus · Accepted Answer

Monetarists believe that attempts to stabilize the economy through active fiscal and monetary policy can actually be destabilizing in the long run. They also argue that the impact lag for monetary policy may not be short and predictable. However, they do support the use of active monetary policy by the central bank. Option A and D are incorrect because monetarists do not necessarily believe in the predictability of impact lags or the reinforcement of fiscal policy by monetary policy.

Monetarists Argue That