Which of the following is TRUE regarding the monetarist theory of the business cycle?
I. Monetarists assume that the quantity of money increases at a constant rate.
II. Fluctuations in interest rates cause business cycles.
III. Changes in the growth rate of the quantity of money affect aggregate demand.
A) II and III
B) I only
C) I and II
D) III only

Question

Quizplus · Accepted Answer

The monetarist theory of the business cycle assumes that changes in the growth rate of the quantity of money affect aggregate demand. It does not necessarily assume that the quantity of money increases at a constant rate, nor does it attribute business cycles solely to fluctuations in interest rates. Therefore, statements I and II are not true, while statement III is true.

Which of the Following Is TRUE Regarding the Monetarist Theory