Asked by Sewar Rawabdeh on May 14, 2024
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According to the monetarists
A) the supply of money changes in response to changes in the levels of real output and prices.
B) changes in the velocity of money are more important than changes in the money supply in causing the level of economic activity to change.
C) an expansionary fiscal policy will lower interest rates and thereby tend to over stimulate investment and consumption.
D) changes in the money supply are the primary cause of changes in the price level.
Velocity of Money
Velocity of money is the rate at which money circulates in the economy, typically measured as the ratio of nominal GDP to the money supply.
Money Supply
The cumulative total of financial resources in an economy, involving cash, coins, and the amounts in checking and savings accounts, at a given instant.
Economic Activity
The production, distribution, and consumption of goods and services within an economy, representing its overall health.
- Absorb the fundamentals of Milton Friedman's monetary theories and their role in shaping fiscal and monetary policies.
- Explore the monetarists’ interpretation of the correlation between money supply and interest rates.
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Learning Objectives
- Absorb the fundamentals of Milton Friedman's monetary theories and their role in shaping fiscal and monetary policies.
- Explore the monetarists’ interpretation of the correlation between money supply and interest rates.
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