In monetarist business cycle theory, decreasing the growth rate of the quantity of money ________ and increasing the growth rate of the quantity of money ________.
A) increases real GDP; decreases the inflation rate
B) decreases real GDP; decreases the inflation rate
C) causes the economy to enter a recession; causes the economy to enter an expansion
D) causes the economy to enter an expansion; causes the economy to enter a recession

Question

Quizplus · Accepted Answer

Monetarist business cycle theory, primarily associated with Milton Friedman, posits that changes in the money supply are the main drivers of economic cycles. Decreasing the growth rate of the quantity of money is believed to slow down economic activity, potentially leading to a recession, while increasing the growth rate of the money supply is thought to stimulate economic activity, leading to an expansion.

In Monetarist Business Cycle Theory, Decreasing the Growth Rate of the Quantity