Monetarists reject using discretionary monetary policy as an effective stabilization tool because
A) it would require the money supply to grow at a rate equal to the economy's long-run rate of economic growth.
B) they do not believe that changes in the money stock affect output or prices.
C) they believe that there are lengthy and variable time lags between when a change in monetary policy is instituted and when the change exerts its primary impact on output and prices.
D) they believe monetary policy can stimulate aggregate demand, but it cannot control inflation.

Question

Quizplus · Accepted Answer

Monetarists view discretionary monetary policy as ineffective because they believe there are lengthy and variable time lags between when a change in monetary policy is instituted and when the change exerts its primary impact on output and prices. They argue that a more predictable and stable growth rate of the money supply would lead to more stable economic growth, without the need for discretionary policy interventions.

Monetarists Reject Using Discretionary Monetary Policy as an Effective Stabilization