Question

Which of the statements best describes the monetary rule, as proposed by the economist Milton Friedman?

Inflation is kept in check in the long run by keeping the growth of M1 and M2 on a steady path.

Inflation is kept in check by directly manipulating interest rates to decrease bond prices.

An acceptable rate of unemployment is targeted and the money supply is adjusted accordingly.

Inflation is kept in check by increasing the growth of M1 and decreasing the growth of M2 in equal amounts.

Answer 1

inflation is kept in check in the long run by keeping the growth of M1 and M2 on a steady path

Step-by-step explanation:

Answer 2

A. Inflation is kept in check in the long run by keeping the growth of M1 and M2 on a steady path

Step-by-step explanation:

Friedman's k-percent rule, where the money supply would be automatically increased by a fixed percentage per year. He stated that money supply should be in a steady rate in check of inflation for better economic performance.He maintained that there is a close and stable association between inflation and the money supply, mainly that inflation could be avoided with proper regulation of the monetary base's growth rate.

As originally proposed by the economist Milton Friedman, the monetary rule is a guideline for policymakers to maintain a reasonable amount of annual inflation. It is primarily accomplished by maintaining the growth rates of M1 and M2 on a steady path, in accordance with the equation of exchange.