According to monetarists,which of the following would most likely eliminate inflation?
A)a steady increase in federal expenditures at an annual rate of approximately 3 percent
B)indexing of wages,taxes,and pensions to the rate of inflation
C)a steady expansion in the money supply at a rate no greater than the long-run growth of real output
D)a steady 3 percent increase in the size of the budget deficit

Question

Quizplus · Accepted Answer

Monetarists believe that inflation is primarily caused by growth in the money supply, so controlling the growth of the money supply is key to eliminating inflation. Choice C suggests a steady expansion in the money supply at a rate no greater than the long-run growth of real output, which would keep inflation under control. Choices A and D suggest increasing government spending, which could actually contribute to inflation. Choice B suggests indexing to inflation, which would help maintain real incomes but may not necessarily eliminate inflation.

According to Monetarists,which of the Following Would Most Likely Eliminate