Monetarists Reject Using Discretionary Monetary Policy as an Effective Stabilization

question 29

Multiple Choice

Monetarists reject using discretionary monetary policy as an effective stabilization tool because

• A) it would require the money supply to grow at a rate equal to the economy's long-run rate of economic growth.
• B) they do not believe that changes in the money stock affect output or prices.
• C) they believe that there are lengthy and variable time lags between when a change in monetary policy is instituted and when the change exerts its primary impact on output and prices.
• D) they believe monetary policy can stimulate aggregate demand, but it cannot control inflation.

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Definitions:

Journal Entries

Records of financial transactions in the accounting system, indicating the accounts and amounts to be debited and credited.

Equipment Cost

The purchase price of machinery and tools required for manufacturing or providing services, excluding ongoing operating expenses.

Salvage Value

The calculated sale amount an asset is deemed to achieve after its useful life concludes.

Useful Life

The duration of time over which an asset is expected to be usable for its intended purpose.