The Argument Advanced by Milton Friedman for Adopting a Monetary

question 208

Multiple Choice

The argument advanced by Milton Friedman for adopting a monetary growth rule is that

• A)active monetary policy potentially destabilizes the economy.
• B)the Fed can control the money supply,but not the level of interest rates.
• C)a constant rate of growth in the money supply would eliminate the booms and recessions that make up the business cycle.
• D)the growth rate of M1 has been unstable.

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Definitions:

Per Month

A time frame reference indicating occurrences or measurements within a calendar month.

Effective Annual Rate

A financial metric that represents the equivalent annual interest rate taking compounding into account, thus providing a more accurate measure of interest earned or paid over a year.

Compounded Semi-Annually

Interest on an investment is calculated and added to the principal sum of the investment two times a year.

Effective Annual Rate

The real return on an investment after accounting for compounding interest over a year, often differing from the stated nominal rate.