The view that changes in the money supply is the primary cause of change in real output and the price level is most closely associated with:
A) Rational expectations theory
B) Real business cycle theory
C) Mainstream economics
D) Monetarism

Question

Quizplus · Accepted Answer

The view that changes in the money supply is the primary cause of change in real output and the price level is a key premise of Monetarism. Monetarists believe that changes in the money supply can directly affect real economic variables such as output and employment in the short run, and that the long-run impact of monetary policy is mainly on the price level.

The View That Changes in the Money Supply Is the Primary