Asked by Jordan Ratliff on May 06, 2024
Verified
The modern monetarists believe that
A) V is very unstable.
B) V never changes.
C) Any changes in V are either very small or predictable.
D) If M rises,V will fall by the same percentage.
Modern Monetarists
Economists who follow the beliefs of monetarism that emphasize the role of governments in controlling the amount of money in circulation to influence the economy.
Velocity V
The rate at which money circulates in an economy, typically measured as the ratio of nominal GDP to the money supply.
M Rises
An increase in the money supply within an economy, which could potentially lead to various economic effects such as inflation or stimulation of economic growth.
- Describe the idea of the velocity of money and its effects on the economy.
- Comprehend the significant impacts made by prominent economists such as Milton Friedman on the field of monetarism.
Verified Answer
SL
Sydnie LindnerMay 13, 2024
Final Answer :
C
Explanation :
The modern monetarists believe that any changes in V are either very small or predictable. This belief is based on the assumption that individuals adjust their money holdings according to changes in interest rates and other economic conditions, leading to a stable velocity of money over time. However, some economists argue that V can be quite volatile in the short run, especially during periods of economic instability or financial crisis. Therefore, while modern monetarists may acknowledge the potential for short-term fluctuations in V, they generally view it as a relatively stable and predictable variable over the long run.
Learning Objectives
- Describe the idea of the velocity of money and its effects on the economy.
- Comprehend the significant impacts made by prominent economists such as Milton Friedman on the field of monetarism.