How do the quantity theorists and the institutional theorists differ in their views about the relationship between inflation and growth and its implications for policy?

Question

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The Answer is Quantity theorist prefer to err on the side of keeping output well below estimated potential output to avoid even small rises in the price level.To them,having a little bit of inflation is like being a little bit pregnant.The little bit of inflation will set in motion a process that will make inflation grow and grow.They believe that inflation undermines long-term growth.It does so by making it more difficult for businesses to enter into long-term contracts.It also forces people to spend their time trying to avoid the costs of inflation.For them,a government policy that creates stable prices is most likely to promote long-term growth.The institutional theorists are not convinced of the inverse relationship between inflation and growth suggested by the quantity theorists.They agree that price-level rises have the potential of generating inflation,and that high accelerating inflation undermines growth,but they do not agree that all price level increases start a high and accelerating inflation.They feel that if the government is careful,it can prevent minor price level increases from growing into a major inflation.They argue that if institutional reforms are made in labor markets,the government can pursue expansionary policies without the fear of inflation.

How Do the Quantity Theorists and the Institutional Theorists Differ