If the velocity of money varies a great deal, steady growth of the money supply is a(n):
A) ineffective way to stabilize aggregate demand.
B) example of discretionary monetary policy.
C) automatic stabilizer.
D) active policy rule.

Question

Quizplus · Accepted Answer

If the velocity of money varies significantly, a steady growth of the money supply does not necessarily lead to a commensurate increase in aggregate demand. This makes it an ineffective way to stabilize aggregate demand.

If the Velocity of Money Varies a Great Deal, Steady