The notion that the annual rate of increase in the money supply should be equal to the potential annual growth rate of real GDP best describes the:
A) Monetary rule
B) Velocity of money
C) Equation of exchange
D) Crowding-out effect

Question

Quizplus · Accepted Answer

This idea is known as the monetary rule, which suggests that the central bank should aim to increase the money supply at a rate equal to the potential growth rate of real GDP to maintain stable prices and avoid inflation or deflation.

The Notion That the Annual Rate of Increase in the Money