Monetarists Argue That the Relationship Between the Amount of Money

question 12

Multiple Choice

Monetarists argue that the relationship between the amount of money which households and businesses want to hold and the level of national income:

• A)has increased historically because of increased accessibility to credit
• B)rises during recessions and falls during periods of full employment
• C)falls during recessions and rises during periods of full employment
• D)is stable
• E)varies both seasonally and through the business cycle in highly unpredictable ways

---

Definitions:

Economy's Natural Ability

The inherent capacity of an economy to grow and adapt over time, based on resources, technology, and human capital.

Active Economic Policy

Government interventions aimed at influencing the economy through measures such as fiscal and monetary policies to achieve specific macroeconomic objectives.

Law of Diminishing Returns

An economic principle stating that adding an additional factor of production results in smaller increases in output after a certain point.

Rational Expectations

A school of thought that argues people form expectations based on all available information, including the likely future actions of government policymakers.