If the Money Supply Is Growing at a Constant Rate

question 234

Multiple Choice

If the money supply is growing at a constant rate of 2% and the economy undergoes a negative demand shock, the theory of monetarism recommends:

• A) coordinating a monetary expansion with a fiscal expansion to increase aggregate demand.
• B) raising the growth rate of money supply to 3% to lower the interest rate.
• C) lowering the growth rate of money supply to 1% to increase saving.
• D) maintaining the growth rate of money supply at 2% and letting the aggregate price level fall.

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Definitions:

Strict Liability

denotes a legal principle where a party can be held responsible for damages or loss without the plaintiff having to prove negligence or fault.

Punitive Damages

Financial compensation awarded to a plaintiff to punish the defendant for particularly harmful behavior and deter future similar actions.

Inherently Dangerous

Refers to activities or substances that, by their nature, pose a significant risk of harm.

Superseding Cause

A superseding cause is an unforeseeable event that interrupts the chain of causation, relieving a defendant from liability for harm caused after the event.