The Best Argument Against Monetarists' Arguments That Steady Money Growth

question 8

Multiple Choice

The best argument against monetarists' arguments that steady money growth would prevent fluctuations in inflation and unemployment is that:

• A)the government has best control over fiscal policy and should focus on that.
• B)large fluctuations in the money supply cannot occur because the supply of money is limited.
• C)steady money growth does not necessarily mean steady aggregate demand if velocity is not stable.
• D)steady growth in the money supply percents fluctuations in output only if aggregate prices are constant.

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Definitions:

Import Quota

A government-imposed limit on the quantity or monetary value of a certain good that can be imported into a country.

Domestic Production

The total value of all goods and services produced within a country's borders.

World Price

The price of a good or service on the international market, dictated by the global balance of supply and demand.

Tariff

A tax imposed by a government on imported or exported goods.