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Milton Friedman helped to establish the economic theory of monetarism.

Which statement best describes the idea of monetarism?

(A) Aggregate supply and demand can only be influenced through fiscal policy.

(B) Changes in consumer behaviors should not be influenced by policy.

(C) Monetary policy is the best way to influence economic growth.

(D) The money supply should not be the determining factor when influencing economic events.

User Raj Peer
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2 Answers

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C. Monetary policy is the best way to influence economic growth.

User Sugar Bowl
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The correct answer is C.

After the sucess of keynesian economics and generalized usage of fiscal policy to boost aggregate demand and to generate economic growth, monetarists promoted the usage of monetary policy mechanisms instead. They defended that it was not the Great Depression era anymore, and hence the liquidity trap was not operating and the arguments given by Keynes to defend fiscal policies over monetary policies were not valid anymore.

Monetarists believed that controlling the money supply was the most powerful tool that goverments had to control economic cycles and that every economic authority should implement an automatic monetary program.

User Kekkeme
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