Asked by Botle Jacqueline on May 19, 2024
Verified
Milton Friedman,a leading monetarist,believes the Fed should not manage the money supply in a discretionary manner.Which of the following statements is NOT a reason for Friedman's belief?
A) The limitations of our knowledge make any discretionary policy very unpredictable.
B) The past performance of the Fed has not given a strong indication that it has the ability to regulate the money supply in such a manner.
C) Friedman advocates the rule of steady monetary growth.
D) Discretionary monetary policy promotes confidence within the business community by providing a greater amount of stability to money and credit.
Milton Friedman
A prominent American economist known for his strong belief in free-market capitalism and for being a leading proponent of monetarism in economic policy.
Monetarist
An economic theory that emphasizes the role of governments in controlling the amount of money in circulation as the primary method for ensuring economic stability and growth.
Money Supply
The total amount of money available in an economy, including cash, coins, and balances held in checking and savings accounts.
- Evaluate the role of fiscal and monetary policies in maintaining economic stability.
- Detail the monetarist theory on the regulation of money supply and its influence on inflation and the economy's output.
Verified Answer
JE
Joseph EstradaMay 21, 2024
Final Answer :
D
Explanation :
Milton Friedman did not believe that discretionary monetary policy promotes confidence within the business community. He argued that the uncertainty of discretionary policy could actually create more instability and unpredictability in the economy. Instead, he advocated for a rule-based approach to monetary policy, such as a steady growth rate in the money supply.
Learning Objectives
- Evaluate the role of fiscal and monetary policies in maintaining economic stability.
- Detail the monetarist theory on the regulation of money supply and its influence on inflation and the economy's output.