Evidence indicates that a recession occurs at about the same time as a decrease in investment. According to the monetarist theory, the decrease in investment is attributable to
A) a decline in the growth rate of the quantity of money.
B) intertemporal substitution in working decisions.
C) a decline in the growth rate of productivity.
D) a fall in animal spirits.

Question

Quizplus · Accepted Answer

According to the monetarist theory, a decrease in investment is caused by a decline in the growth rate of the quantity of money. This is because the monetarist theory posits that changes in the money supply are the primary drivers of changes in aggregate demand, and therefore changes in investment.

Evidence Indicates That a Recession Occurs at About the Same