Monetarists' preference for reduced-form models is based on their belief that
A)reverse causation is a problem.
B)structural models may understate money's effect on economic activity.
C)money supply changes are always endogenous.
D)monetary policy affects only investment spending.

Question

Quizplus · Accepted Answer

Monetarists believe that structural models can understate the effect of money supply changes on economic activity. Therefore, they prefer reduced-form models that focus solely on the relationship between money supply and economic activity, without trying to capture the full complexity of the economy.

Monetarists' Preference for Reduced-Form Models Is Based on Their Belief