In monetarist business cycle theory, the factor leading to a business cycle is changes in
A) investment spending.
B) the growth rate of the quantity of money.
C) consumer spending.
D) net exports.

Question

Quizplus · Accepted Answer

Monetarist business cycle theory posits that changes in the growth rate of the quantity of money lead to fluctuations in output and employment. This is because changes in the money supply affect interest rates, which in turn impact investment, consumption, and other economic decisions that drive the business cycle. Therefore, the growth rate of the quantity of money is the most significant factor according to this theory.

In Monetarist Business Cycle Theory, the Factor Leading to a Business