Which monetarist idea has been absorbed into mainstream macroeconomics?
A) The net export effect has a stronger effect on ﬁscal policy than monetary policy.
B) Cuts in tax rates signiﬁcantly increase the productive capacity of the economy over the historical averages.
C) Excessive growth in the money supply over long periods leads to inﬂation.
D) The federal funds rate is a more important monetary target than the money supply.

Question

Quizplus · Accepted Answer

The idea that excessive growth in the money supply over long periods leads to inflation has been widely accepted and incorporated into mainstream macroeconomic theory. This is known as the Quantity Theory of Money, which argues that increases in the money supply lead to increases in prices.

Which Monetarist Idea Has Been Absorbed into Mainstream Macroeconomics