Within the aggregate demand-aggregate supply framework, monetarists argue that a change in aggregate:
A) Demand will have a large effect on the price level, but a temporary effect on output
B) Demand will have a small effect on the price level, but a permanent effect on output
C) Demand will have a large effect on the price level and a large effect on output
D) Supply will have a large effect on the price level, but a temporary effect on output

Question

Quizplus · Accepted Answer

Monetarists believe that changes in aggregate demand will primarily affect prices, but not necessarily have long-term impacts on output. This is because they argue that changes in the money supply are the main drivers of changes in aggregate demand, and that any increases in spending or investment resulting from changes in the money supply are likely to be temporary, as the economy adjusts to the new level of prices. Therefore, monetarists would argue that a change in aggregate demand would have a large effect on the price level, but only a temporary effect on output.

Within the Aggregate Demand-Aggregate Supply Framework, Monetarists Argue That a Change