Question

which of the following is true, according to monetarists? multiple choice individuals hold idle balances for rational reasons. if the economy is at full employment, increasing the money supply will increase the price level. the velocity of money increases as real gdp increases. changes in the money supply have no effect on real variables. the total demand for money equals the asset demand for money.

Answer 1

Monetarists believe that changes in the money supply have no effect on real variables, such as real GDP and employment. They hold that individuals hold idle balances for rational reasons and that the velocity of money increases as real GDP increases.

Step-by-step explanation:

According to monetarists, the correct statement is that changes in the money supply have no effect on real variables. Monetarists believe that changes in the money supply primarily affect nominal variables, such as the price level and nominal GDP, rather than real variables like real GDP and employment. They argue that individuals hold idle balances for rational reasons and that the velocity of money increases as real GDP increases. However, they do not believe that changes in the money supply have a significant impact on real variables.