The best argument against monetarists' arguments that steady money growth would prevent fluctuations in inflation and unemployment is that:
A)the government has best control over fiscal policy and should focus on that.
B)large fluctuations in the money supply cannot occur because the supply of money is limited.
C)steady money growth does not necessarily mean steady aggregate demand if velocity is not stable.
D)steady growth in the money supply percents fluctuations in output only if aggregate prices are constant.

Question

Quizplus · Accepted Answer

Monetarists argue that steady money growth can prevent fluctuations in inflation and unemployment. However, this argument ignores the fact that velocity (the rate at which money circulates in the economy) is not stable and can vary over time. If velocity changes, then even steady money growth may not result in steady aggregate demand. As a result, steady money growth may not prevent fluctuations in inflation or unemployment.

The Best Argument Against Monetarists' Arguments That Steady Money Growth