In the LR, we always reach full employment. wide booms and busts. The market system would provide substantial macroeconomic stability... were it not for government interference in the economy, Monetarists see that the government has promoted. 30. Monetarists stress the role of the natural rate of unemployment. ✓ Reserve requirements or the discount rate, or through open market operations. (second source of macro instability along with demand side). Which of the following is true about the equilibrium rate of interest? C) prices and wages are sticky in the short run. Shorter pay periods, widespread use of credit cards, faster means of making payments enable people to hold less money and to turn it over more rapidly than was possible in earlier times. Monetarists believe that the Great Depression occurred largely because. Question 10 options: A) the crowding-out effect reduces investment. ✓ The equilibrium interest rate should decrease, and the equilibrium rate of investment should increase. 10) Monetarists argue that V in the equation of exchange is stable and thus a change in M will bring about a direct and proportional change in nominal GDP. Question 1 0 / 1 pts Which of the following tends to reduce the effect of an expansionary open market operation on the money supply? Monetarists like Milton Friedman blame the Depression on high-interest rates. They believe the expansion of the money supply will end recessions and boost growth. caroloopa. Key Concepts: Terms in this set (11) Monetarists theory. True False (True Answer ) 1258 Monetarists argue that discretionary monetary policy does more harm than good. 10 Monetarists argue that: A) Increase in Money Supply is likely to lead to inflation only. Most published rates are nominal rates, while real rates remove the effects of inflation. Assume the aggregate supply curve is horizontal and the economy is experiencing a recession. Thus a change in M leaves V unaffected but brings a corresponding change in expenditure (MV) in the economy. A monetary stimulus is designed to shift the, According to Bernanke's policy guide, a 1/4 point decrease in long-term interest rates results in a. C) The total demand for money equals the asset demand for money. Start studying 104. ADVERTISEMENTS: On the other hand, there are some who argue […] American economist Milton Friedman is generally 37. Thus a change in M leaves V unaffected but brings a corresponding change in expenditure (MV) in the economy. Friedman, 1959, 1962, 1985; Brunner, 1981) nonetheless insist that this is the "risk-minimizing" strategy in view of the lag problem and the political incentives problem. Spell. True False 111.Monetarists argue that government policy interference in the economy is the primary cause of macroeconomic instability. responses, while Friedman and other monetarists argued convincingly that the high rates of inflation were due to rapid increases in the money supply, making control of the money supply the key to good policy. It is particularly associated with the writings of Milton Friedman, Anna Schwartz, Karl Brunner, and Allan Meltzer, with early […] ✓ Because businesses may be able to borrow from foreign banks at cheaper rates. Write. Monetarism is a macroeconomic school of thought that emphasizes (1) long-run monetary neutrality, (2) short-run monetary nonneutrality, (3) the distinction between real and nominal interest rates, and (4) the role of monetary aggregates in policy analysis. Which shift should occur if the Fed raises the discount rate? Question 10 options: A) the crowding-out effect reduces investment. Monetarists argue that changes in the money supply. Related. price and wage flexibility provided by competetive markets should cause fluctuations in aggregate demand to alter product resource prices rather than output and employment. Question 8 options: C. changes in tax rates. ✓ Aggregate demand, prices, and nominal interest rates only. B) The velocity of money increases as real GDP increases. Which of the following is most likely to occur if the Fed pursues expansionary monetary policy? END RESULT. 37. In the real business cycle theory, if real output falls, the public. they are... An increase in M increases P or Q, or some combination of the both, a decrease in M reduces P or Q, or some combination, In the Equation of Exchange, nominal GDP is equal to, Monetarists say that ____ is the single most important cause of macroeconomic instability, Monetary policy causes macroeconomic instability, explain what a increase in the money supply does. 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