Question

Which of the following statements would Milton Friedman agree with concerning the conduct of monetary​ policy?

A. The government should actively control the money supply.
B. The money supply should be left to market forces.
C. Inflation targeting is an effective policy tool.
D. The central bank should focus on stabilizing output.

Answer 1

Milton Friedman would agree with active control of the money supply by the government, aimed at maintaining a constant growth rate to match the real economy's growth and prevent money from causing economic instability.

Therefore, the correct answer is: option A). The government should actively control the money supply.

Step-by-step explanation:

Milton Friedman, a Nobel laureate economist, would most likely agree with the statement that the government should actively control the money supply, specifically by increasing it at a constant growth rate.

Friedman argued that central bank discretion in monetary policy could lead to economic instability and uncertainty, and thus advocated for a steady growth rate in the money supply, which he believed would match the growth of the real economy over time.

Inflation targeting or stabilizing output were not the central focus for Friedman's monetary policy approach, rather he was concerned with preventing money from being a major source of economic disturbance by advocating for a predictable monetary growth.