Monetarists claim that central banks have to keep the money supply growing at a steady rate....

Monetarists claim that central banks have to keep the money supply growing at a steady rate. They believe that fluctuations in the money supply are responsible for most large fluctuations in the economy. They argue that slow and steady growth in the money supply would yield stable output, employment, and prices. On the other hand, some economists believe that monetarist policy rule would work only under a certain circumstance otherwise it would be useless. According to these economists, what is necessary for the monetary policy rule to be effective?

Expert Solution

Rahul Sunny answered 8 months ago

Monetarists, claim that central banks have to keep the money supply growing at a steady rate....

Monetarists, claim that central banks have to keep the money supply growing at a steady rate. They believe that fluctuations in the money supply are responsible for most large fluctuations in the economy. They argue that slow and steady growth in the money supply would yield stable output, employment, and prices. On the other hand, some economists believe that monetarist policy rule would work only under a certain circumstance otherwise it would be useless. According to these economists what is...

Monetarists argue that the money supply should be expanded at a fairly constant rate rather than...

Monetarists argue that the money supply should be expanded at a fairly constant rate rather than being manipulated to combat the business cycle. True False According to Marx, under socialism, the state would be a dictatorship of the proletariat. True False

Why are Monetarists dependent on the monetary (flow of money and the supply of money) side...

Why are Monetarists dependent on the monetary (flow of money and the supply of money) side of the economy, and the Keynesians dependent on aggregate demand? Is there a significant difference? Explain

If the central bank increases the money supply, then the nominal interest rate will ____ and...

If the central bank increases the money supply, then the nominal interest rate will ____ and the exchange rate will ____. A rise; appreciate B rise; depreciate C fall; appreciate D fall; depreciate

What are the 3 major instruments that central banks can use to control money supply? Explain...

What are the 3 major instruments that central banks can use to control money supply? Explain each one.

Suppose the central bank targets the money supply. As a result, the interest rate will ______...

Suppose the central bank targets the money supply. As a result, the interest rate will ______ and output will ______ following an increase in government spending A fall;rise B rise;fall C rise;rise D fall; fall

If the money supply is growing at a rate of 3 percent per year, real GDP...

If the money supply is growing at a rate of 3 percent per year, real GDP (real output) is growing at a rate of 0 percent per year, and velocity is growing at 3 percent per year instead of remaining constant, what will the inflation rate be?

Suppose the European Central Bank decreases the growth rate of their money supply and the Federal...

Suppose the European Central Bank decreases the growth rate of their money supply and the Federal Reserve simultaneously decreases the growth rate of money supply as well. Working through the analytics involved explain the impact these policy interventions will have on the dollar-euro exchange rate.

Why many central banks rejected their former approach such as controlling money suplly or interest rate...

Why many central banks rejected their former approach such as controlling money suplly or interest rate setting?

In Monetaria real GDP is growing at 2% per year and the money supply is growing...

In Monetaria real GDP is growing at 2% per year and the money supply is growing at 5% per year. suppose that the velocity of the money has been constant. A) Find the Inflation Rate. B) The nominal interest rate is 10%. Find the real interest rate, assuming that inflation will remain the same. C) Suppose you are a small hats retailer. To simplify the analysis, lets assume that the only costs of doing business is paying for the merchandise...

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